Wednesday, March 4, 2009

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New UBS chairman shows the battle for Swiss banking is far from over

by Clive Horwood

Former Swiss finance minister to replace Kurer at helm of UBS.

UBS announced today that it plans to appoint Kaspar Villiger, a former Swiss finance minister, as its next chairman. Villiger will replace Peter Kurer in April.

UBS has now lost its two most senior executives in the space of a week, following the resignation of previous chief executive Marcel Rohner on February 26.

The new management team now comprises Villiger, the Swiss finance minister from 1995 to 2003, and Ossie Grübel, the former chief executive of Credit Suisse, who has replaced Rohner.

The appointments of Villiger and Grübel, both safe pairs of hands and pillars of the Swiss establishment, show three things. First, UBS believes it has still not done enough to prevent outflows from its core wealth management business, which has lost assets of close to SFr150 billion in the past 12 months. Second, the bank still needs to do more to win back the trust of Swiss politicians and the public. And third, the Swiss national authorities remain deeply concerned about the challenges facing its private banking industry.

Last week, UBS was forced to pay almost $800 million to settle a case that alleged the Swiss bank had conspired to help US clients avoid paying federal taxes. US authorities are still demanding that UBS, and Swiss private banks in general, give up client names – a move that would risk destroying the industry.

Kurer and Rohner were only in their jobs for 12 and 18 months respectively, although both were long-term UBS employees. Neither of them was at the helm of the bank when it built positions in the sub-prime market that ultimately led to US announcing the largest corporate loss in Swiss history in 2008 (SFr19 billion), writing down over $50 billion is assets and hiving off $60 billion of non-performing securities into a government-supported fund.

However, both were closely associated with the discredited regime of former chairman Marcel Ospel and chief executive Peter Wuffli. As former head of wealth management (Rohner) and group legal counsel (Kurer), they were also implicated in the US court case.

Kurer and Rohner carried out a swift reorganisation of UBS’s businesses, principal among them splitting wealth management, investment banking and asset management into three standalone business units, a move that was largely well received by the international investment community.

But they were on a hiding to nothing in their home market, where many Swiss are bitter and angry at the tarnishing of a brand name long synonymous with the country itself.

The measures taken over the past 12 months undoubtedly leave UBS better placed to survive as a business. But Kurer and Rohner have not been able to complete the task of restoring trust, profitability and stability which Rohner said, in his last major interview as CEO, were key to UBS’s revival. The completion of that task now falls to Villiger and Grübel.

Both Kurer and Rohner should be commended for managing their departures in a classy fashion that shames many of their counterparts in the global banking industry. They were thrust unexpectedly into the most difficult of roles, and worked tirelessly for limited reward, at times in the face of great hostility, to save the institution they worked for. They both clearly realised they could not be the people to take UBS forward in the longer term. But if Villiger and Grübel finish what they started, history will look more kindly on Kurer and Rohner than many of their countrymen currently do.
Why Rohner left UBS

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