Banks, Europe | featured news

Swiss banking giant UBS said Thursday that a rogue trader has caused it an estimated loss of $2 billion, stunning a beleaguered banking industry that has proven vulnerable to unauthorized trades. Police in London said they arrested a 31-year-old UBS trader, Kweku Adoboli, in the alleged fraud. UBS declined to confirm his name.

European stock futures declined Wednesday as Moody’s Investors Service downgraded Societe Generale SA and Credit Agricole SA and Chinese Premier Wen Jiabao said developed nations should not rely on China to bail them out. U.S. futures and Asian shares dropped.

After a series of positive announcement from Greek FinMin Venizelos, rumors that Moody's would downgrade French banks and Germany was preparing for a Greece to default send equities tanking, particularly French banks.

A top board member of the European Central Bank unexpectedly resigned on Friday in what analysts saw as further evidence of the deep divisions over how to resolve Europe’s growing debt crisis. The move immediately rattled European markets and the euro, which slipped to a six-month low against the dollar. The European Stoxx and German DAX indexes tumbled 3.5 percent.

Several European countries that banned short-selling have extended the prohibition until the end of September. When concerns about European banks’ exposure to Greek debt sent their stocks plummeting two weeks ago, market regulators in Belgium, France, Greece, Italy and Spain stepped in to prohibit traders from betting on the decline in a share’s price.

Stock markets in Asia opened sharply lower Friday amid signs of a possible U.S. recession and renewed worries over the financial health of Europe's banks.

European risk assets remain under pressure as investors digest the latest round of bank stress tests by the European Banking Authority.

Nearly one-third of 91 European banks undergoing the latest round of public stress tests could need external support to be brought up to scratch, Moody's said.

Under the plan, French banks would give Athens more time to pay back loans as they come due over the next three years.

French Finance Minister Christine Lagarde appeared poised to become the head of the International Monetary Fund this week despite a strong challenge to Europe's traditional hold on the job.