Mumbai: Swiss lender UBS AG has begun firing some employees of its commercial banking division, a little over two weeks after it surrendered its commercial banking licence to the Reserve Bank of India (RBI).
UBS surrendered its commercial banking licence on 21 June, and started distributing letters of termination of service on Friday. It is giving severance packages on the basis of number of years spent with the company.
Confirming the development, a Hong Kong-based spokesman of UBS attributed the move to the bank’s strategy of repositioning its capital and balance sheet-intensive businesses, while sharpening focus on its core businesses in equities and corporate client solutions.
“As a consequence, UBS (is) winding down its bank branch which currently operates its foreign exchange, rates and credit, and wealth management businesses,” said Mark Panday, the bank’s spokesman, in an email response on Monday. He added that around “50 redundancies, confined to employees of the bank branch, are envisaged between now and the end of the second quarter of 2015”.
UBS has only one bank branch in India.
According to two people close to the development, who did not want to be named, the severance package comprises a month’s salary for every completed year of service. The bank’s wealth management business is four years old but most employees have been with UBS for less than that period.
Panday declined to comment on the severance package, saying the information is “confidential”.
Most investment bankers agree that severance packages are directly linked to the number of years spent with the firm. They say the commercial banking business of UBS in India was new, hence most of the employees who have been asked to leave will receive small severance packages.
In September 2012, UBS hired Nitin Jain from Nomura Capital India Pvt. Ltd to head the bank’s fixed income, currencies and commodities business in India. Calls to Jain went unanswered.
UBS has been reducing its advances and deposits in a bid to pare its capital requirement. According to RBI data, advances by UBS India stood at Rs.631 crore for fiscal 2012 from Rs.685 a year ago.
UBS got approval from RBI in 2008 to start commercial banking operations in India.
Surrendering the commercial banking licence also comes at a time when several large business houses and non-banking financial companies (NBFCs) are seeking banking licences.
“While India remains an attractive market, UBS has concluded that it will not be feasible to implement its business plan for the bank branch in Mumbai in the form originally planned,” the UBS spokesperson said.
Asked whether RBI regulations are proving to be too stringent for the foreign lender, the spokesperson said it believes RBI has a “robust prudential and regulatory compliance framework for banks which has no bearing on UBS’s decision to exit banking business in India”.
Globally, UBS AG has had its share of troubles.
In December, UBS was indicted by the Financial Services Authority (FSA) for Libor rigging. FSA is a regulator of all providers of financial services in the UK. An ex-UBS employee, Tom Hayes was allegedly accused of being a part of Libor rigging this month, the UK-based Independent reported in July.
In June, BBC reported that UBS France was slapped with a €10 million fine for delaying measures to curb money laundering and cross-border fiscal fraud.