UBS discovers $2B loss in unauthorized trade

UBS reports $2 billion trading lossSTORY HIGHLIGHTSNEW: Police in London arrest a man, but will not say if it's connected to UBSUBS says no client positions are affected by the lossThe unauthorized trading could mean the bank reports a loss this quarterIt would be among the largest losses in unauthorized tradingRELATED TOPICSUBS AG (CNN) -- Swiss banking giant UBS discovered that unauthorized trading has cost it an estimated $2 billion, it announced Thursday.

The "unauthorized trading by a trader in its investment bank" could cause the bank to record a loss in the third quarter of this year, it said.

The loss would potentially be among the largest costs ever to a bank in unauthorized trading.

UBS said no client positions were affected by the loss, which is still being investigated.

It declined to tell CNN where the trading occurred.

Police in London arrested a man on suspicion of fraud in the early hours of Thursday morning.

They revealed the arrest of the 31-year-old man in the City of London, the British capital's banking district, shortly after the UBS announcement, but declined to confirm whether it was linked to the Swiss bank's loss.

The man remains in police custody, they said, declining to name him.

UBS declined to comment on the arrest.

Rogue trader Jerome Kerviel cost his bank, Societe Generale, almost $6 billion, and was sentenced to three years in prison last year.

The bank made a pre-tax profit of about $1.9 billion in the second quarter of this year, it announced in July, down from about $2.5 billion the quarter before that.

UBS shares were down more than 7% about three hours after the $2 billion loss was announced.

CNN's Alex Mohacs, James Partington, Laura Perez Maestro and Kendra Petersen contributed to this report.

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