As UBS's Largest Shareholder, Singapore's GIC Voices Disapproval With Rogue Trading Loss

In a rare show of expression for the usually intensely private sovereign wealth fund, Singapore's Government Investment Corporation has voiced concern with UBS's trading loss.

(September 21, 2011) — Singapore’s Government Investment Corporation (GIC) has expressed disappointment with Swiss bank UBS’s trading errors, which caused $2.3 billion in losses.

In response to media queries on a meeting between GIC’s senior management and UBS’s CEO Oswald Gruebel at the sovereign wealth fund’s headquarters in Singapore, GIC issued the following:

“GIC and UBS management discussed the alleged fraudulent trading that led to the large financial loss for UBS. GIC expressed disappointment and concern at the lapses and urged UBS to take firm action to restore confidence in the bank. GIC sought details of how UBS is tightening the control environment and looks forward to the conclusions of on-going investigations.”

Despite the fund’s disappointment, it added: “GIC’s view of UBS’s fundamental strength as a well-capitalized bank with a strong private-wealth management franchise remains unchanged.”

The Singapore state investment fund is the largest UBS shareholder, owning about 6.6% of the bank. The meeting between GIC and UBS’s Gruebel stemmed from unauthorized trades by Kweku Adoboli, who has been arrested following suspicion of fraud and abuse of his position. Currently, GIC is sitting on a loss of about $8.5 billion, excluding dividends, on the UBS stake it purchased in December 2007 for $11 billion.

The controversy over the London-based trader has added to already difficult times for the Swiss bank, as Europe’s sovereign debt crisis continues to pummel financial institutions across the continent. Meanwhile, as a result of the unauthorized trading loss, ratings agency Moody’s, Standard & Poor’s (S&P), and Fitch Ratings have placed UBS on review for downgrade.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href=''></a>; 646-308-2742