UBS CEO quits, board wants faster restructuring

UBS Chief Executive Oswald Gruebel resigned on Saturday, shouldering the blame after the Swiss bank lost $2.3 billion in alleged rogue trading.

The bank said it had appointed Sergio Ermotti, head of Europe, Middle East and Africa, to replace him for now, and that it wanted to speed up a restructuring of its investment banking business.

"Oswald Gruebel feels that it is his duty to assume responsibility for the recent unauthorized trading incident. It is testimony to his uncompromising principles and integrity," Chairman Kaspar Villiger said in a statement.

Gruebel, a 67-year-old former trader who helped turn around Credit Suisse a decade ago, was brought out of retirement in 2009 to try to revamp UBS after it almost collapsed in 2008 under the weight of more than $50 billion lost on toxic assets.

Ermotti, a 51 year-old from Switzerland's Italian-speaking region of Ticino, joined UBS in April from UniCredit. Before being hired by UniCredit in 2005 he worked at Merrill Lynch for 18 years.

"With his extensive industry experience and together with the executive leadership team he (Ermotti) will continue to implement UBSs strategic alignment," Villiger said, adding the board would continue to look for a permanent successor to Gruebel.

The board reconfirmed the bank's "integrated" strategy, combining wealth management, investment bank, asset management and Swiss retail and corporate businesses, but said it wanted to accelerate a restructuring of investment banking.

"In the future, the Investment Bank will be less complex, carry less risk and use less capital to produce reliable returns and contribute more optimally to UBS's overall objectives," Villiger said.

The board said it had asked management to accelerate the implementation of a client-centric strategy for the investment bank "concentrating on advisory, capital markets, and client flow and solutions businesses."

UBS's board meeting, one of four regular ones per year, had originally been due to end on Friday ahead of the UBS-sponsored Singapore Formula One motor racing Grand Prix on Sunday, when executives will be trying to reassure big clients.

But deliberations continued into Saturday by conference call after the board left Singapore on Friday, with some members headed back to Switzerland, sources told Reuters.

UBS said in August it would axe 3,500 more jobs to shave 2 billion Swiss francs off annual costs, with almost half of those cuts coming from the investment bank, which had grown to almost 18,000 staff from 16,500 a year ago.

Bank In Turmoil

Clients pulled nearly 400 billion Swiss francs ($442 billion) -- almost 20 percent of total client assets -- from UBS after the bank was battered in the financial crisis as well as a prolonged dispute with the U.S. tax authorities and posted the biggest annual corporate loss in Swiss history.

Under Gruebel's leadership, the bank's inflows have since turned positive but other private banks are now circling again to nab clients worried about reputational risk in the wake of the rogue trader affair.

UBS's largest shareholder, Singapore sovereign wealth fund GIC, met the bank's management earlier in the week and in a rare public statement expressed its disappointment. It urged them to take firm action to restore confidence and wanted details of how the bank would tighten risk controls.

The $2.3 billion loss allegedly caused by UBS trader Kweku Adoboli in unauthorized trades compares to the 4.9 billion euros ($6.6 billion) lost by rogue trader Jerome Kerviel at Societe Generale three years ago, an event that prompted calls for tighter rules and felled that bank's then-chairman and CEO Daniel Bouton.

In 2007, former UBS CEO Peter Wuffli was ousted unceremoniously at a board meeting in Spain to coincide with the America's Cup yachting event there, in which UBS was sponsoring a team.

[Source: By Emma Thomasson and Catherine Bosley, Reuters, Zurich, 24Sep11]

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