Zurich/Singapore: UBS chief executive Oswald Gruebel will ask the Swiss bank’s board to back a radical overhaul of its investment bank at a meeting in Singapore this week, after unauthorized trading caused a $2.3 billion loss.
The UBS board is due to meet in Singapore on Wednesday and Thursday for one of the four regular meetings it holds every year, said two sources with direct knowledge of the arrangements.
“Of course the investment bank matter will be discussed and the way forward,” a UBS insider said.
The meeting in Singapore has the added benefit that the Singapore sovereign wealth fund GIC, which is UBS’s biggest shareholder with a 6.4% stake, can be consulted.
The meeting, scheduled before the rogue trades came to light last week, coincides with the Singapore Formula One Grand Prix, of which UBS is a major sponsor.
UBS is under pressure to scale down, ringfence or even split off its risky investment banking business from its core wealth management unit in order to shield private clients.
The bank was widely expected to speed up an overhaul of its investment bank that had been planned for announcement at an investor day on 17 November, though big shareholders have signalled they could wait until that date while the bank completes an internal investigation, one source at the bank said.
Gruebel said on Sunday he would “bear the consequences” of the $2.3 billion trading loss that was discovered last week but did not want to quit, adding the affair would influence the future strategy of the investment bank.
Another UBS insider said this did not necessarily imply Gruebel would leave immediately, but he might be thinking of forgoing his annual bonus again, speeding up restructuring or making other senior management changes.
Investment bank head Carsten Kengeter, who is also in the firing line, told staff he was fully committed to working closely with them to repair the damage to the bank’s reputation.
“Now is the time for everyone across the investment bank to demonstrate... that we are not going to let a single calculated act of deception deflect us from achieving our long-term strategic goals,” he said in a memo obtained by Reuters.
Citing unnamed sources, the Tages-Anzeiger newspaper reported that Gruebel wants to carry out the restructuring himself and is seeking a board vote of confidence that he should stay on at least until 2013 or else he will step down.
UBS declined to comment on the report.
Weber to step in earlier?
The loss is a heavy blow to the reputation of Switzerland’s biggest bank, which had just started to recover after its near collapse during the financial crisis and a damaging US investigation into its aiding wealthy Americans to dodge taxes.
The UBS board has set up a committee chaired by independent director David Sidwell, former chief financial officer at Morgan Stanley, to conduct an independent investigation into the unauthorized trades and the bank’s control systems.
London trader Kweku Adoboli was charged on Friday with fraud and false accounting dating back to 2008.
Gruebel, a gruff 67-year-old German who previously ran Credit Suisse, was brought out of retirement in 2009 to help clean up UBS after huge losses on subprime assets forced the Swiss government to bail out the bank.
He initially indicated he would only stay in the job for a couple of years to get the bank back on its feet but suggested recently that he could stick around at least until former Bundesbank boss Axel Weber takes over as chairman in 2013.
The Tages-Anzeiger reported that one option under discussion was that chairman Kaspar Villiger could hand over to Weber a year earlier than planned.
Meanwhile Sergio Ermotti, the former deputy boss of UniCredit who joined UBS as Europe, Middle East and Africa chief in April, could be given new responsibilities as he is groomed as a potential successor to Gruebel.
Singapore’s GIC said on Monday the losses on its investment in UBS were offset by good investment decisions, which had helped its portfolio rebound to a level seen prior to the global financial crisis, but did not comment on the latest loss.
The stake was worth around 2.5 billion francs, which means the sovereign wealth fund has lost about 77% of its 11 billion franc investment in UBS made at the end of 2007, excluding dividends, according to Reuters calculations.