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UBS chairman calls on shareholders to back foreign deal

Published on 27/02/2008

27 February 2008

BASEL, Switzerland – UBS AG Chairman Marcel Ospel urged shareholders Wednesday to approve a recapitalization deal that would raise billions from sovereign wealth funds.

Switzerland’s largest bank, which has been one of the hardest-hit by the subprime crisis, wrote down CHF15.6 billion last year and posted its first full-year net loss in a decade.

The loss shocked investors, who had considered UBS one of the more conservative financial institutions, and there have been calls for Ospel to step down from bank’s helm.

“I would never thoughtlessly relinquish my responsibility, and I intend to ensure that UBS gets back on the road to success,” Ospel told an extraordinary shareholders meeting in Basel.

He urged shareholders to back the board’s approval to raise CHF13 billion from a Singapore government fund and an unidentified Middle East investor.

“We believe that this measure is absolutely necessary,” Ospel said, calling the current financial crisis possibly the most difficult since the stock market crash of 1929.

The proposal has angered smaller shareholders who say they are being bypassed in the recapitalization effort.

Shareholder activists have tabled a motion demanding a special audit of UBS’s accounts for the last year, a move the board opposes.

Dominique Biedermann of the Ethos investment foundation, one of UBS’ chief critics, said the independent audit was necessary because UBS has failed in its responsibility to investors.

Ospel, however, said the bank was already cooperating with Switzerland’s federal banking commission on a thorough probe.

Some 6,500 shareholders are attending the meeting. The chairman is one of three UBS board members who will stand for re-election at this year’s regular general meeting on April 23.

Ospel attacked those who suggested the bank had withheld information about its exposure to risky mortgage-backed investments.

“That charge is nonsense,” he said.

“We have always provided information as soon as possible and as completely as possible, and we will continue to do so going forward.”

UBS shares, which have more than halved in price over the past year, were up 0.4% on the Zurich exchange at CHF37.24 Swiss francs.

The company said earlier this month that its direct subprime-related exposure stood at US$27.6 billion at the end of 2007.

UBS also is facing a lawsuit from Germany’s HSH Nordbank AG, which said Tuesday it is suing the Swiss bank for US$275 million in damages over losses stemming from mortgage securities gone bad. The company accused UBS of fraudulent actions related to US$500 million in collateralized debt obligations.

UBS said it denies all allegations and intends to defend itself vigorously.

HSH is one of many German banks, such as WestLB and SachsenLB, suffering from mortgage-related investments gone sour.

[Copyright ap 2008]