“Spare a thought for the public relations team at UBS”, said Jeffrey Goldfarb on Breakingviews.com. A supposedly conservative Swiss bank has “ended up a big subprime loser”. UBS has hitherto written off $38bn, with more to come. Fears that the huge writedowns have destabilised the bank and reflect deficient risk controls at UBS have prompted an exodus from its private bank, which manages the assets of some of the world’s wealthiest people. Clients withdrew $39bn in the second quarter.
UBS’s new chairman Peter Kurer has now revamped the bank’s corporate governance structure, eliminating a superfluous layer of management that allowed his predecessor to take a “tight grip over strategy and risk-taking”, leading to the huge losses, said Goldfarb.
Other headaches for UBS
Now, however, the Swiss banking regulator, galvanised by all the red ink, is proposing tougher capital requirements – “not good news” as UBS tries to restructure this division, noted Christine Seib in The Times. What’s more, last month a former UBS banker pleaded guilty to helping a UBS client evade US taxes, and now the US authorities are probing further. They want information from UBS about taxpayers who may be using Swiss accounts to evade income taxes.
Handing over details, however, would undermine the privacy at the heart of Swiss banking, said Seib. Swiss banks always insist that their private banking is popular because “they are good at their job”, while rivals retort that clients are enticed largely by Swiss secrecy laws, said David Wighton, also in The Times. If this tax probe succeeds, “it may become clearer who is right”.