CARSTEN KENGETER, the head of UBS’s investment bank, plans to accelerate changes to the business’s size and structure following the Swiss group’s discovery of $2.3 billion in unauthorised trading losses.
Mr Kengeter, who senior executives say retains the board’s backing in spite of the losses, believes his division needs to move more quickly to reduce risk and to exit non-core businesses, according to people familiar with his thinking.
The prime area for cuts is in UBS’s fixed-income business, which lacks the scale and the risk appetite to compete with rivals.
However, the trading scandal may force the bank to take an axe to higher-risk activities in its equities business, historically one of the bank’s strengths.
Some UBS officials have hit back in recent days at talk that the massive trading losses allegedly racked up by Kweku Adoboli (31), a “Delta One” trader specialising in exchange-traded funds, are proof the investment banking industry needs a more sweeping overhaul.
Mr Adoboli, who remains in custody after being charged on Friday with fraud and false accounting, was a relatively junior trader who was not authorised to make speculative bets with the bank’s own money – “proprietary” trading. He allegedly evaded detection by booking fake hedging trades to cover the magnitude of his losses.
In a memo sent to investment banking staff late on Sunday, Mr Kengeter said: “It is very difficult to build and maintain a system which protects us effectively against every possible likelihood of attack, but we will not rest until we have controls that are as watertight as possible.”
So far, there is no sign that Mr Kengeter or Oswald Grübel, his chief executive, intend to step down over the incident, which has wiped 11 per cent off the value of the group’s shares.
UBS had already embarked on a high-level review of its operations in light of dismal results for the first half of this year. – (Copyright The Financial Times Limited 2011)
