UBS CEO Oswald Gruebel quits after trading scandal

24th September 2011, Comments 0 comments

Swiss banking giant UBS announced Saturday the resignation of chief executive Oswald Gruebel, less than two weeks after the bank was rocked by a rogue trading scandal that lost it $2.3 billion.

Switzerland's largest bank said in a statement that its board of directors had accepted Gruebel's resignation.

Sergio Ermotti has been named as interim CEO effective immediately, the statement said, nine days after the arrest of Kweku Adoboli, a UBS trader accused of a 1.7 billion euro fraud.

UBS Chairman Kaspar Villiger said in the statement that while the board "regrets" his resignation Gruebel "feels that it is his duty to assume responsibility for the recent unauthorised trading incident."

Villiger praised Gruebel for "his uncompromising principles and integrity", and acknowledged that during his tenure "he achieved an impressive turnaround and strengthened UBS fundamentally."

The board also said it would "fully support" the independent investigation into the rogue trading and would ensure that "mitigating measures" were implemented to prevent such incidents from recurring.

Swiss media speculation had been mounting that Gruebel would be ousted at the long-scheduled UBS board meeting held in Singapore in the run-up to Sunday's Grand Prix -- the bank is a major sponsor of Formula One racing.

Reports said Gruebel was expected to seek a vote of confidence during the meeting, with the bank under pressure from shareholders and some Swiss politicians over the rogue-trading scandal.

But Villiger, shortly after the statement was released, told journalists the UBS board did not want Gruebel to step down immediately, and would have preferred he stayed on until a key shareholders' meeting, set for the spring of next year.

But for Grubel, staying on until next year would not have sent a strong enough signal regarding his responsibility for the scandal, and so he chose to resign now, Villiger explained by phone from Singapore.

On Tuesday, the Government of Singapore Investment Corp (GIC), UBS's biggest shareholder, issued a rare public rebuke to the bank for lapses that led to the losses.

"GIC expressed disappointment and concern at the lapses and urged UBS to take firm action to restore confidence in the bank," the cash-rich sovereign wealth fund said in a statement.

UBS had turned to Gruebel, a former Credit Suisse boss, to stem its record losses amid the global financial crisis and seek a way out of its bitter tax evasion spat with the United States.

Gruebel, 67, had engineered Credit Suisse's own recovery in the early 2000s, after the bank took massive charges arising from the Enron scandal. Within a year, the bank returned to profitability.

Likewise at UBS, Gruebel managed to restore the bank's profitability around 18 months after he took over the helm.

Within minutes of taking the reins at UBS, he told his staff that massive cost cuts were imminent and since 2009, proceeded to slash thousands of jobs, trimming a bank that was getting too large to govern.

Investors heaved a sigh of relief when the bank not only became profitable again in the third quarter of 2010, but also stemmed an outflow of client assets for the first time since the financial crisis.

However, Gruebel has now been forced to resign after UBS was hit with an internal crisis on his watch -- the discovery of unauthorised trades allegedly made by Adoboli which lost the bank $2.3 billion.

Born November 13, 1943 in eastern Germany, Gruebel had entered the banking industry as an apprentice at Deutsche Bank.

His interim successor Ermotti had been appointed chairman and CEO of UBS Group Europe, Middle East and Africa in April, according to the UBS Investment Bank website.

© 2011 AFP

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