Switzerland’s largest bank, UBS, has said that it may post a loss in 2011 Q3 due to an unauthorised trading loss of $2 billion (Â£1.27 billion) in its investment bank.
The market reaction was to drop the Swiss share price by 9.6%, although it did recover slightly thereafter.
"UBS has discovered a loss due to unauthorized trading by a trader in its Investment bank. The matter is still being investigated, but UBS's current estimate of the loss on the trades is in the range of $2bn." Said the bank.
UBS also added that “no client positions were affected”.
One possibility being put forward is that it occurred as a result of the Swiss franc being pegged to the Euro. Even though UBS is a Swiss bank and should have been talking to the SNB.
The silver bugs also have an unsubstantiated theory  that this loss was due to an attempt by the bank to exit a naked silver short position.
UPDATE: 'A 31-year old man has been arrested by City of London police in connection with rogue trading that has cost UBS, the Swiss banking giant, an estimated $2bn (£1.3bn)' – Telegraph.
One wonders what the bank would have done had this ‘unauthorised trading’ led to a gain of $2 billion? You can just imagine the parties and mutual back-slapping that would have occurred. It would then have been very ‘authorised’ trading in those circumstances I imagine.
For the bank to lose $2 billion some other people (probably banks) have presumably made $2 billion. And no ‘client position’ will have been affected, but how about shareholder positions? And who will ultimately pay for it, their customers?
If this is not a stark reminder that we need to separate retail banking as far as possible and as quickly as possible from these casino activities then nothing is. So it comes at a very convenient time for the UK government to bolster its argument to push through the banking reforms recommended by the Vickers report.