UBS has admitted that certain internal controls were not in place at the time that rogue trader Kweku Adoboli allegedly ran up a $2 billion (£1.3 billion) loss on the bank's derivatives desk.
This follows a memo that interim chief executive Sergio Ermotti sent to employees earlier this month saying that the bank was aware that its IT systems did detect the rogue activity but that "this was not sufficiently investigated nor was appropriate action taken to ensure existing controls were enforced".
In an update after a regulatory filing to the US Securities and Exchange Commission (SEC), UBS said: "Following the discovery of the unauthorised trading activities that UBS announced in September, management has determined that certain internal controls were not effective on December 31, 2010, but at the same time has reconfirmed the reliability of the financial statements included in UBS's 2010 annual report."
UBS has identified two monitoring controls that were lacking at the end of December 2010, when Adoboli allegedly placed the unauthorised trades.
One control, which required the bank to confirm trades with counterparties, was "not operating", while a monitoring tool designed to check the validity of cancelled or changed trades "had ceased to operate effectively". Furthermore, other controls designed to make sure that internal transactions in UBS's equities and fixed income, currencies and commodities businesses were valid and accurately recorded also "did not operate effectively".
"We have taken and are taking measure to address these control deficiencies," the bank said.
But these may not be the only deficiencies that UBS uncovers.
It added: "Investigations are ongoing, and management may become aware of facts relating to the investment bank that cause it to broaden the scope of the findings described above and to take additional remedial measures."
The bank said that the financial effect of the unauthorised trading activity has been fully reflected in its third quarter 2011 financial report, which was also published today.
It reported a pre-tax profit of CHF 1 billion (£0.7 billion) in the period, despite the CHF 1.8 billion (£1.3 billion) loss caused by the rogue trading.
Adoboli, charged with committing false accounting between October 2008 and September 2011, and fraud in the three months to September this year, is set to enter a plea hearing in a London criminal court on 22 November. He has already apologised for his "disastrous miscalculations".