Swiss banking giant UBS began a meeting of its board in Singapore on Wednesday as it faces increasing pressure from shareholders after being hit by a $2.3 billion rogue-trading scandal.

"/> Swiss banking giant UBS began a meeting of its board in Singapore on Wednesday as it faces increasing pressure from shareholders after being hit by a $2.3 billion rogue-trading scandal.

" />
SHARE
COPY LINK

UBS

UBS board meets as pressure mounts

Swiss banking giant UBS began a meeting of its board in Singapore on Wednesday as it faces increasing pressure from shareholders after being hit by a $2.3 billion rogue-trading scandal.

UBS board meets as pressure mounts
Twicepix (file)

UBS chief executive Oswald Gruebel declined to take questions before going into the bank’s Singapore office for the meeting, which is expected to last for three days, Dow Jones Newswires reported.

The Singapore meeting had long been scheduled and was being held in the run-up to the Singapore Grand Prix. UBS is a major sponsor of Formula One racing.

On the eve of the meeting the Government of Singapore Investment Corp (GIC), UBS’ biggest shareholder, issued a rare public rebuke of 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 on Tuesday.

“GIC sought details of how UBS is tightening the control environment and looks forward to the conclusions of on-going investigations.”

It said however that “UBS’ fundamental strength as a well-capitalised bank with a strong private wealth management franchise remains unchanged.”

Swiss media reports said Gruebel is expected to seek a vote of confidence during the meeting.

UBS has not released any details of the board meeting, with a bank spokeswoman confirming only that it “will be held this week.”

But Gruebel, in a separate town hall-style meeting with employees on Tuesday, ruled out a sale of the bank’s investment banking division, Dow Jones Newswires reported, quoting sources.

His remarks are significant because Swiss politicians are putting pressure on UBS to scale down or even spin off its investment bank in the aftermath of the scandal.

Gruebel told employees at Wednesday’s closed, one-and-a-half hour meeting that UBS will retain its investment banking division and that it must be a part of its wealth management business, Dow Jones quoted one person who attended the gathering as saying.

The CEO also said the bank was in a better capital position than it was two years ago.

UBS announced on September 15th that it had lost $2 billion in unauthorised transactions by one of its traders, before upping the sum to $2.3 billion.

A London-based equities trader, Kweku Adoboli, 31, has been arrested and charged over the losses.

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.

FRANCE

Switzerland’s UBS faces €3.7-billion fine as crucial court ruling looms

A Paris court will rule Wednesday on whether Swiss banking giant UBS illegally tried to convince French clients to hide billions of euros in Switzerland, charges which prompted prosecutors to seek a record €3.7-billion fine.

Switzerland's UBS faces €3.7-billion fine as crucial court ruling looms
UBS denies charges it helped French clients evade tax and says it will defend itself "vigorously". Photo: AFP

The trial opened last autumn after seven years of investigations, launched when several former employees came forward with claims of unlawful conduct. 

The move came as authorities across Europe cracked down on tax evasion and dubious banking practices in the wake of the global financial crisis which erupted in 2007.

The pressure eventually forced Switzerland to effectively end its tradition of ironclad bank secrecy, by joining more than 90 countries which agreed to automatically share more client account information among each other.

In the UBS case, French authorities determined that more than €10 billion had been kept from the eyes of tax officials between 2004 and 2012.

The National Financial Prosecutor's office urged a €3.7-billion ($4.2 billion) fine, the largest ever sought in France, saying the bank and its directors “were perfectly aware that they were breaking French law” by unlawfully soliciting clients and helping them evade French taxes.

They also sought a €15 million fine for UBS's French subsidiary, and fines of up to €500,000 for six top executives, including Raoul Weil, the former third-in-command at UBS, and Patrick de Fayet, formerly the second-ranking executive for its French operations.

In addition, lawyers for the French state, which is a plaintiff in the case, asked for €1.6 billion in damages.

UBS, which was ordered to post €1.1 billion in bail, has denied the charges and said its operations complied with Swiss law.

It also says that it was “unaware” that some French clients had failed to declare assets in Switzerland, and that prosecutors have not produced any proof, such as client names or account numbers, to back up their fraud claims.

The case is being closely watched by industry executives at a time when Paris and other European capitals are hoping to lure multinational banks from London as Brexit looms.

'Milk tickets'

UBS is accused of organising or inviting prospective clients to prestigious outings such as the French Open or luxury hunting retreats, where UBS's Swiss bankers would meet their “prospects” — something they were not allowed to do under French law.

UBS France directors then used notes called “milk tickets” to keep track of how many “milk cans” – amounts of money – were transferred to Swiss accounts.

They say the system was merely a way to balance out bonuses due to French bankers who were effectively losing a client to their Swiss peers, and the notes were later destroyed.

But investigators claim the “milk tickets” were proof that UBS had a parallel accounting system for keeping the transfers off its official books.

Only one “milk ticket” was found during the inquiry, prompting defence lawyers to argue there was no proof to justify claims of a massive fraud.

Yet prosecutors pointed to the roughly 3,700 French UBS clients who later took advantage of an amnesty offer to regularise their tax declarations with the French authorities.

UBS has been embroiled in a series of similar cases, most notably in the United States, where the authorities said the bank used Switzerland's banking secrecy laws to help rich clients avoid taxes.

In 2009 it paid $780 million to settle charges it helped thousands of American citizens hide money from the Internal Revenue Service, and agreed to turn over information on hundreds of clients, severely denting Switzerland's long tradition of shielding banking clients and their operations from prying eyes.

That case was also prompted by a former American UBS employee turned whistleblower, Bradley Birkenfeld, whose book “Lucifer's Banker: The Untold Story of How I Destroyed Swiss Bank Secrecy” was published in 2016.

Last November UBS was again sued by US authorities, who accuse the bank of misleading investors over the sale of mortgage-backed securities in 2006 and 2007, just before the financial crisis struck.

UBS has denied the charges and said it will defend itself “vigorously”.