United California Bank lost $40M on cocoa futures — a Swiss branch's commodity gamble

United California Bank was a major California-based bank that operated a Swiss subsidiary, United California Bank of Basel. The Basel branch was supposed to serve international clients and provide typical banking services, but its traders were engaging in speculative commodity futures trading.

In 1970, the bank announced that its Basel branch had lost $40 million trading cocoa futures contracts. The loss was the result of unauthorized speculative positions in the cocoa market, where a single trader had made a series of bad bets on cocoa prices. The positions were far beyond the branch's authorized limits.

The loss was catastrophic for the Basel branch, which was forced to close. The Swiss banking authorities revoked the branch's licence, and United California Bank withdrew from Switzerland entirely. The case was one of the earliest examples of a US bank's foreign subsidiary being destroyed by unauthorized trading, and it foreshadowed similar scandals at Daiwa, Barings, and other banks.

The loss also highlighted the risks of banks engaging in commodity trading — an activity that was far from their core business of lending and deposit-taking. Cocoa futures were a particularly unusual choice for a bank, as the bank had no natural exposure to cocoa prices.