February 28, 2024

Grübel Resigns at UBS After Adoboli Rogue Trading Scandal

The resignation was a dramatic fall for Mr. Grübel, who came to be known as “Saint Ossie” for reviving Credit Suisse, another Swiss banking giant, before he was hired out of retirement two and a half years ago to do the same at UBS.

Mr. Grübel decided that the $2.3 billion loss as a result of unauthorized trades by a midlevel employee had made it impossible to run a bank that has lurched from crisis to crisis in recent years and desperately needs to repair its reputation.

“I did not take the step of resigning lightly,” he wrote in an e-mail to staff on Saturday. “I am convinced that it is in the best interests of UBS to approach the future with a new leader.”

He also said the trading scandal had “worldwide repercussions, including political ones.”

The case has added to a global debate about whether there should be more stringent regulations for banks that are so big or interconnected — like UBS — that their problems can spread distress throughout the financial system. In 2008, for instance, UBS required a bailout from Swiss taxpayers after sustaining billions of dollars in losses.

UBS is one of Europe’s biggest banks, and the trading scandal provided another shock to a financial system that is already in a fragile state. European banks have been facing increasing difficulty maintaining the trust of investors and international lenders, making it difficult for them to raise the money they need to do business.

UBS reiterated on Saturday that it had enough capital to cover the trading loss not to seriously threaten the overall health of the bank.

If anything, the UBS episode strengthens the hand of regulators who have called for tighter regulation and insisted that Switzerland’s two biggest banks, UBS and Credit Suisse — whose combined assets are four times the size of the Swiss economy — be required to keep more capital in reserve than smaller banks.

The biggest banks, advocates of tighter regulation maintain, still do not have their risks under control and have not learned the lessons of the 2008 financial crisis.

The chairman of UBS, Kaspar Villiger, said the top priority for the bank was to overhaul its investment banking operation, which has been troubled for years. UBS plans to scale back the unit, which is run by Carsten Kengeter, by cutting parts of the business that require more capital, like credit.

UBS named Sergio P. Ermotti, head of Europe, the Middle East and Africa, as the interim chief executive.

The search for a new chief executive could take up to six months, Mr. Villiger said.

Initially, after a 31-year-old trader in the bank’s London office, Kweku M. Adoboli, was arrested on Sept. 15 and accused of making billions of dollars in unauthorized trades dating to 2008, Mr. Grübel seemed to hold out the possibility of staying at UBS.

“If you ask me whether I feel guilty, I would say no,” he told Der Sonntag, a Swiss newspaper, in the days after Mr. Adoboli’s arrest.

But when the board started one of its annual meetings in Singapore on Wednesday, he began to consider resigning. Mr. Villiger said that in a string of discussions and chats in the days that followed he tried to persuade Mr. Grübel to stay, but he added that Mr. Grübel ultimately felt that resigning was the right thing to do.

The board members then flew back to Zurich from Singapore and the decision to accept Mr. Grübel’s resignation was made on a conference call, Mr. Villiger said.

Mr. Grübel, 67, will not receive a severance payment and there is a six-month notice period, Mr. Villiger said.

During his tenure, Mr. Grübel managed to return UBS to profit by reversing client money outflows at its private banking business and by reducing costs by cutting thousands of jobs.

Julia Werdigier reported from London and Jack Ewing from Frankfurt, and Susanne Craig contributed reporting from New York.

Article source: http://www.nytimes.com/2011/09/25/business/ubs-chief-oswald-grubel-resigns-over-trading-scandal.html?partner=rss&emc=rss

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