UBS chief pretty sure board will back him despite scandal

Singapore: UBS chief executive Oswald Gruebel said he has the support of his board despite the rogue trading scandal that cost Swiss bank $2.3 billion and prompted calls for tougher regulation of risky investment bank practices.

Arriving in Singapore for meetings with the bank’s management and board, Gruebel laughed when asked by Reuters at his hotel on Wednesday if he still had the board’s backing and said, “Yes. Always.”

Gruebel is expected to ask UBS’ board to back plans for a radical overhaul of investment banking under his leadership at a meeting in Singapore, a plan sources said would be sped up after the trading scandal.

[caption id=“attachment_88490” align=“alignleft” width=“380” caption=“Gruebel said on Sunday he would “bear the consequences” of the trading loss that was discovered last week but did not want to quit. Reuters”]  [/caption]

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London-based UBS trader Kweku Adoboli was charged on Friday with fraud and false accounting dating back to 2008 relating to the losses.

UBS said in a statement on Sunday that he concealed “unauthorised speculative trading” in equity index futures over the last three months" by creating fictitious hedging positions in internal systems.

Gruebel said on Sunday he would “bear the consequences” of the 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.

The bank’s executive board was due to meet on Wednesday at their main offices in the city’s business district before its wider set of board members meet later in the week.

The meeting is one of the four held every year and strategic changes to the investment bank are on the agenda, said several sources with direct knowledge of the plans.

It coincides with Singapore hosting the Formula One Grand Prix, of which UBS is a major sponsor.

Shareholder pressure

UBS is already under pressure to scale down, ring-fence or even split off its risky investment banking business from its core wealth management unit in order to shield private clients.

But a source at the bank told Reuters that the board will not be rushed into dumping the investment bank following the rogue trades.

Politicians in Switzerland and Britain renewed calls to separate riskier investment banking businesses from commercial bank operations.

The trading loss is a heavy blow to the reputation of Switzerland’s biggest bank, which had just started to rebound after its near collapse during the financial crisis and a damaging U.S. investigation into its aiding wealthy Americans to dodge taxes.

“Our near-term concern is the impact the recent turmoil will have on customer confidence in Wealth Management, which had been staging a gradual recovery in recent quarters,” broker Collins Stewart said in a note.

UBS’s largest shareholder, Singapore sovereign wealth fund GIC, met with the bank’s management on Tuesday and said it had expressed its disappointment at the case. It urged them to take “firm” action to restore confidence and wanted details of how the bank would tighten its risk controls.

GIC, which has a 6.4 percent stake in UBS and has lost about 77 percent of its 11 billion Swiss franc ($12.4 billion)investment, added though that its view of the bank as well-capitalised remained “unchanged”.

UK and Swiss regulators have launched a joint probe into why the bank’s risk unit failed to detect the trades and assess the overall strength of their trading controls.

Reuters