Will Kurer become whipping boy?
Switzerland's biggest bank UBS, the worst hit of its global banking peers by the US subprime home loan crisis, faces a stormy shareholders' meeting today when a new chairman could emerge as the whipping boy.
A report detailing the causes that led UBS to write down over $37 billion on subprime related losses, which the bank sent to shareholders on Monday, could be used by critics wanting a change in the bank's strategy.
The 50-page report conceded that weak risk control and a pay structure that encouraged risky deals were among key factors leading to its massive losses.
At the same time, however, it said that one of the bank's key strategic objectives was its integrated business model and pointed out that the review saw no "fundamental flaw in relation to its objectives".
Many people have criticized management for not changing tack and so the findings will likely be picked up on.
Bank Helvea analyst Peter Thorne said the report will be "scrutinized intensively for ammunition by those who believe that a fundamental restructuring of the UBS business model is appropriate".
UBS was already subject to criticisms during an extraordinary general meeting in February as it came clean about the extent of the problems and losses it faced because of its exposure to higher-risk US mortgages.
Analysts expect the management to get another very rough ride after it issued a profit warning saying it expects to write down an additional 19 billion dollars during the first quarter.
The new writedowns would leave the bank with a 12 billion Swiss franc (7.5 billion euros) loss for the first three months of the year.
With chairman Marcel Ospel having already announced his departure, shareholders' anger could be trained at his designated successor, Peter Kurer, who is currently general counsel of the group.
The 59-year-old Swiss lawyer joined UBS in 2001, but critics say he is not an ideal candidate to rescue the bank given his lack of experience in the financial sector.
Leading the opposition of Kurer's nomination is a former director of the bank, Luqman Arnold, who leads investment firm Olivant.
Arnold, who holds over 1.1 percent of shares in UBS through Olivant, said as a member of the bank's board Kurer was an "insider" and therefore can neither offer the objectivity required for the role nor represent a break from the "insular corporate governance tradition of UBS".
AFP
(China Daily 04/23/2008 page17)
