UBS has been fined £8 million by the Financial Services Authority (FSA), the City regulator, for having weak controls that allowed staff in its private bank to make unauthorised trades on client accounts and hide the losses for almost two years.

The fine, the third largest the FSA has imposed, relates to unauthorised foreign exchange and metals transactions with client money on at lest 39 customer accounts. The trading was uncovered in an internal investigation triggered by a UBS whistleblower.

The bank’s investigators estimated there were up to 50 unauthorised transactions a day between January 2006 and December 2007.

The FSA said it would have fined UBS £10 million but offered a 20 per cent discount because the bank settled the investigation early.

UBS has already compensated the affected clients, the FSA said. The bank said today: "UBS deeply regrets this incident and having fully co-operated with the FSA’s investigation we are now pleased that this matter has been settled so that we can move forward."

"This sanction arises from control failings within our UK International Wealth Management business, dating back to 2007 in respect of which UBS has already taken full remedial steps."

UBS has paid $42 million (£26 million) in compensation to the affected clients, and said none of the employees involded still worked at the bank.

Margaret Cole, FSA director of enforcement and financial crime, said: “The penalty, one of the largest fines we have levied, reflects our tougher enforcement stance and our policy of imposing steep penalties to achieve credible deterrence.

“These employees were able to take advantage of UBS’ inadequate systems and controls, giving them free rein to make unauthorised trades with customer money that they were then able to conceal.

“It is imperative, particularly in these more challenging financial conditions, that firms have suitable systems and controls in place to keep their houses in order. Where firms fall short in this regard, the consequences will be severe.”

Simon Morris. a partner at law firm CMS Cameron McKenna, said the fine is "good news for FSA, which now comes across as the credible deterrent against financial crime that it has so long talked about becoming."

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