UBS executives resign over alleged rogue trading affair
• Co-heads of global equities depart investment bank
• Quick appointment of new boss to boost confidence
UBS branch in Switzerland
A UBS branch in Switzerland. Photograph: Arnd Wiegmann/Reuters
Wednesday 5 October 2011 20.51 BST Last modified on Sunday 10 January 2016 11.12 GMT
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The fallout from alleged rogue trading linked to Kweku Adoboli continued apace on Wednesday when senior heads rolled in the investment banking division of UBS.
The co-heads of global equities, Francois Gouws and Yassine Bouhara, resigned while a handful of others faced “disciplinary action”, the Swiss bank stated, as it attempted to draw a line under the alleged affair which the bank has said caused $2.3bn (£1.5bn) of losses.
Oswald Grübel, executive of the embattled Swiss bank, quit last month to “bear full responsibility for what occurs” at the bank, which has 6,000 staff in the UK.
Adoboli has not entered a plea to the four charges of fraud and false accounting he faces and remains in custody until his next scheduled appearance at Bishopsgate magistrates court on 20 October.
An existing director, Sergio Ermotti, is temporarily in the top post while a successor is sought. In a memo to staff on Wednesday he said: “Our internal investigation indicates that risk and operational systems did detect unauthorised or unexplained activity but this was not sufficiently investigated nor was appropriate action taken to ensure existing controls were enforced.”
The chief executive of the investment banking arm Carsten Kengeter remained in his role on Wednesday night and said he had accepted the resignations of the two co-heads of global equities, traditionally one of the most highly regarded divisions of the Swiss bank.
In an attempt to paper over the cracks at the top of the bank’s flagship division it accelerated the arrival of Mike Stewart from Bank of America Merrill Lynch where he had been head of global equities. He will now become global head of equities at UBS in attempt to bolster confidence of staff, concerned about the impact the loss will have on their end of year bonuses.
Kengeter also sent a memo to staff. He said: “A number of front office staff have been suspended pending further disciplinary action. We will also be taking appropriate disciplinary measures against responsible individuals in our operations and control functions in the coming weeks”.
The bank did not name the staff that were facing disciplinary action or reveal what action might be taken. But it is thought eight of the most senior staff at the bank are involved and City sources believe that even more could face action before the inquiry into Adoboli’s alleged “unauthorised trading” is fully completed.
“Under the circumstances, including the fact that independent investigations are ongoing, we are not providing further details on the unauthorised trading incident at this time,” the bank said.
Gouws was London-based and was only appointed co-head of global equities in May 2010 after a career with the bank which began in South Africa in 1995.
Bouhara had only joined UBS in September 2010 after joining from Deutsche Bank. He had been scheduled to become chief executive of UBS’s emerging markets business on 1 November this year.
The scale of the loss at UBS has created fears for hundreds of jobs as the bank was a major employer in the City. It is under pressure from domestic regulators to scale back its “casino” investment banking arm.
When Grübel quit, after being hauled out of retirement in 2009 when the bank was crippled by the credit crunch, he said: “This incident has worldwide repercussions, including political ones. I did not take the step of resigning lightly.”
His successors promised to adopt a more “client-centric strategy” and to accelerate an ongoing review of UBS’s investment banking activities, which could create more jobs in the City.
Some 3,500 cuts had been announced across the group even before the trading loss emerged, although this week the bank reversed its earlier warning that taking the $2.3bn hit would cause the entire bank to report a loss in the third quarter. Instead it now expects a “modest” profit, helped in part by the fall in the value of its debt.
Kengeter warned staff further changes were due. “We continue to align our strategy with the new economic and regulatory environment so that we can contribute meaningfully to the distinctive strengths of UBS as a group,” he said. “This means further investing in areas that make economic and strategic sense, exiting those that don’t, and finding new ways to deliver much more effectively in others. I look forward to working with you to achieve this.”