The chairman of the embattled UBS banking group says he wants to remodel the organisation, bringing in new leaders across the entire organisation.This content was published on August 18, 2008 - 13:01
Peter Kurer also believes Switzerland's largest bank will be profitable again next year.
UBS is Europe's hardest hit victim of the current credit crisis, having written down about $42 billion (SFr46 billion) of investments.
Last week, the group announced a second-quarter loss of SFr358 million at the same time as separating its investment banking, asset management and private banking arms. It also reported wealth outflows of SFr44 billion for the period.
Kurer told the NZZ am Sonntag newspaper that it was now important for the bank to be led into a "radical transformation phase".
"It is like after a heavy storm. You have at first to remove all the dead wood, clean out the house and cellar and in a third phase bring the house back to spick and span."
He said experience had shown this would take between two and three years, adding that in the future UBS could once again "earn very much money".
Kurer, who took over as chairman in April from the heavily criticised Marcel Ospel, said he did not see the outflow of money from the bank as "dramatic" but it did cause him concern.
"The outflow of client money is extremely regrettable and it hurts. But you have to keep it in perspective.
"We are talking about an outflow of around one per cent of the total assets of the wealth management business. We can bring back confidence by turning in a profit again."
Kurer also said that the bank took the risk of court cases against it "very seriously", mentioning that it had resolved a complex case in the United States against so-called auction-rate securities.
It was forced to buy back $19.4 billion (SFr21 billion) of allegedly mis-sold bonds in the US earlier this month.
"We will handle all our other legal problems in the same energetic way," he commented.
Linked to results
Asked how he would force the pace in the three separate business units, Kurer said management salaries would be directly linked to results.
This would encourage managers to expand their businesses profitably as quickly as possible. It would push them to have costs under control and have the "correct appreciation of risks".
He said the reorganisation brought clarity and transparency.
"Managers and staff who do not add to earnings will have to feel that in their salaries."
Kurer added that the bank's strategy had to be understood by everyone.
"The entire bank right down to the last member of staff has to understand that that this is a serious business. We have to make sure the impulse goes from top to bottom.
UBS endured a tough 2007 and has spent the first half of 2008 in no better shape as a result of the US subprime mortgage crisis.
In July 2007, chief executive Peter Wuffli stepped down following the collapse of the bank's hedge fund Dillon Read Capital Management.
In October 2007, UBS said it would cut 1,500 jobs in its investment banking arm, including that of its head Huw Jenkins. Chief financial officer, Clive Standish, left at the same time.
UBS has written down more than $40 billion as a result of the subprime mortgage market collapse in the United States. Chairman Marcel Ospel stepped down in April.
The bank was then investigated for allegedly helping US citizens evade taxes, following a confession from a former employee. The case led to UBS stating it would stop offshore banking activities in the US.
UBS has also been forced by US regulators to buy back billions of dollars of securities sold to customers that consequently lost their value.