Directors step down at embattled UBS

Kurer's board faces a shake-up Reuters

Four board members have abruptly resigned from Swiss bank UBS, which is already reeling from huge subprime losses and a United States tax evasion probe.

This content was published on July 1, 2008 - 11:13

No reason was given for the departure of a third of the bank's board two months after its annual general meeting. UBS shares dipped temporarily below SFr20 ($19.6) for the first time since the bank was created over ten years ago, before finishing the day at SFr20.30.

Stephan Haeringer, Rolf Meyer, Peter Spuhler and Lawrence Weinbach said on Tuesday they would leave the embattled bank in October. Weinbach had been re-elected for office by UBS shareholders in April and all four were just two months into their year-long tenure.

Former chairman Marcel Ospel stepped down in April to be replaced by Peter Kurer. Some shareholders have criticised the lack of finance experience on the UBS board.

An emergency general meeting has been called for October 2 to elect replacement board members. At the same time, UBS plans to present the results of its strategic review to shareholders.

"I thank the departing Board members for their excellent work and dedication to our institution over a number of years," UBS chairman Peter Kurer said in a statement.

"All of them have contributed substantially in their respective functions to the development of our bank and have provided key support in redesigning our corporate governance."

The announcement was greeted as "good news" by sustainable investment group and vocal critic Ethos.

Search for replacements

The resignations were not totally unexpected, according to Zurich Cantonal Bank analyst Andreas Venditti. He pointed out that Spuhler had publicly announced his intention to step down once a suitable replacement was found.

"I guess that in April [when the AGM was held] things were so turbulent that the bank did not have any replacement candidates available," he told swissinfo.

"Just replacing the old guys does not help unless you have really good candidates, the market would be disappointed again. The bank clearly said that these people should have banking, finance and risk management know-how and they needed time for the evaluation process."

UBS's new corporate governance regime, separating board and executive powers, came into force on Tuesday. Fiat chairman Sergio Marchionne will now act as part-time non-executive chairman at the bank under Kurer.

Criticism had been leveled at UBS in the wake of the subprime debacle for a perceived blurring of the lines between executive and board functions.

Problems mount

UBS has been one of the world's worst hit banks from the US subprime mortgage crisis, writing off some SFr39 billion ($38 billion) in recent months.

It announced plans to cut about 5,500 jobs, or seven per cent of its workforce, in May after reporting a first-quarter loss of SFr11.5 billion ($11.1 billion). The Swiss press has been speculating about more losses in the second quarter, which has just ended.

Share prices also fluctuated wildly last week on rumours of a proposed takeover bid from British banking giant HSBC.

The bank has been further rocked by a former employee recently admitting in a US court to helping US citizens evade taxes. This has been accompanied by an investigation by American tax authorities into UBS's activities in the country.

UBS may soon face a court order demanding the names of thousands of its US tax paying clients – a move that would damage Swiss banking confidentiality laws.

swissinfo, Matthew Allen in Zurich

Tough times

UBS endured a tough 2007 and has spent the first half of 2008 in no better shape as a result of the United States subprime mortgage crisis.

In October 2007, UBS said it would cut 1,500 jobs in its investment banking arm, including that of its head Huw Jenkins. UBS chief financial officer, Clive Standish, left at the same time.

Later that month the bank announced it was writing off SFr4.2 billion on subprime losses and SFr726 million pre-tax loss for the third quarter – the first quarterly loss in nine years.

In December UBS said another $10 billion would be written off as the US subprime crisis deepened. It also announced plans for a SFr13 billion funding plan from Singapore and Middle East investors.

A further $4 billion was written off in January, bringing the total losses to around SFr20 billion. Another SFr19 billion was written off in April, accompanied by the news of Marcel Ospel's resignation as chairman. The bank sought to raise another SFr15 billion through a rights issue.

In May, the bank announced a further 5,500 job cuts as it posted first quarter losses of SFr11.5 billion.

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