Ospel finally quits

UBS's chairman, Marcel Ospel, has survived a string of upheavals in a decade as the driving force behind the giant Swiss bank. But the announcement of further massive writedowns and a rights issue meant his time was up. By Sean Farrell
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The Independent Online

It was only on Monday night that the UBS board finally decided to replace Marcel Ospel. UBS's chairman had resolutely survived a string of management upheavals in his decade as the driving force behind Switzerland's biggest bank, but yesterday's announcement of more massive writedowns and a SFr15bn (£7.5bn) rights issue proved to be the final straw.

Last year's $18bn (£9.1bn) of writedowns from holdings of collateralised debt obligations and other toxic instruments forced the bank into its first annual loss since Mr Ospel drove its formation through a merger 10 years ago. Yesterday's further SFr19bn of writedowns on US real estate and structured credit products has led analysts to predict a further loss this year.

Mr Ospel says that in not seeking re-election at this month's annual general meeting, he is merely going back to a decision he took last spring when the financial crisis was in its earliest stages. The collapse of UBS's Dillon Read Capital Management (DRCM) hedge fund in May was one of the first signs that confidence was collapsing in the credit markets.

Mr Ospel says: "At the beginning of the year, I said I would be prepared to stand for another one-year term to do my part to help UBS out of its current difficulties... I am confident that UBS has now taken the right steps to deal with its current difficult situation.

"I have come back to a plan I originally made before the crisis... of not standing to the board of directors in April 2008."

UBS's general counsel, Peter Kurer, will replace Mr Ospel. UBS insists that Mr Ospel identified Mr Kurer some time ago as his successor but others suspect that the lawyer may prove to be an interim chairman and that his appointment indicates that Mr Ospel had hoped to stay on.

Guy de Blonay, who manages the Global Financials Fund at New Star Asset Management, says: "I don't think he wanted to go but he had to accept that the pressures were strong. He wanted to secure the stability of the company before leaving; he didn't want to jump from a sinking ship."

The pressure has been building on Mr Ospel since the departure of Peter Wuffli as chief executive in July in the wake of the DRCM collapse. Many saw Mr Wuffli's sudden ousting as another in a line of departures engineered by Mr Ospel to protect his position at the top of the bank. But with Mr Wuffli gone, Mr Ospel has faced fierce criticism in Switzerland for overseeing ever-increasing writedowns from UBS's late charge into the structured credit markets. Mr Ospel resisted calls for his head from individual shareholders at the bank's seven-hour extraordinary general meeting, held in his home city of Basel, last month to approve a SFr13bn capital injection from sovereign wealth funds in Singapore and the Middle East.

Mr Ospel, who came from a working class family in Basel, joined Swiss Bank Corp in 1977 after working in junior positions at various banks and earning a degree in his late 20s. Apart from three years at Merrill Lynch, he rose through the ranks of what was Switzerland's third-biggest bank to become chief executive in 1996. Having spearheaded the acquisition of Warburgs merchant bank in the UK, he drove through the merger with Swiss Bank's bigger rival Union Bank in 1998 to form UBS.

The following year, Mr Ospel, as chief executive of the merged bank, came close to agreeing a merger with Merrill Lynch that would have turned UBS into a transatlantic powerhouse. The collapse of the deal was said to have made Mr Ospel determined to impose an iron grip on UBS.

Mr Ospel's desire in 2001 to control the bank pitted him against Luqman Arnold in the episode that entrenched his reputation as the ruler of UBS. Mr Ospel, by now chairman, went over the heads of the bank's executive board to agree a bail-out of Swissair, the ailing airline. In a rare act of defiance, the main board responded to a complaint by Mr Arnold, president of the executive board, by cautioning Mr Ospel. His answer was to propose that he should go back to being chief executive with Mr Arnold as chief operating officer.

Though he backed down, Mr Arnold's position had become untenable and, faced with a choice between the two, the board ousted Mr Arnold, who went on to run Abbey National. At the same time, Markus Granziol, another rival of Mr Ospel, was ousted as chief executive of investment banking and sidelined as chairman of the business. He left six months later.

Mr Ospel says that with a fully underwritten rights issue in place, he has done his part, but Simon Maughan, an analyst at MF Global, says that in going to shareholders for new capital Mr Ospel sealed his fate. "He has said repeatedly: 'We will make it through. We don't need to have a rights issue.' He has had to go for that reason," Mr Maughan says.

The relentless flow of bad news from UBS, one of the first banks to be hit by the US sub-prime crisis, ultimately proved too much for Mr Ospel. The bank announced $4bn of new write-downs in January only six weeks after a shock $10bn charge in mid-December that Mr Ospel said made him "personally ashamed".

"I ultimately take responsibility for the bank's situation," Mr Ospel said yesterday.

Some observers believe Mr Wuffli was responsible for UBS's excursion into the riskier elements of investment banking and that to blame Mr Ospel is unfair. But Mr Ospel is identified with UBS's once-lauded drive to diversify away from private banking to compete with the US investment banks.

And Mr Ospel's reputation as the real power behind UBS's strategy has ultimately made it hard for him to avoid blame for the fiasco that has rocked the Swiss banking world. He can only hope that his manoeuvrings do not overshadow his formidable reputation as a banker and deal maker.

Mr de Blonay of New Star says: "Ospel has clearly been the leader and engine behind what UBS has achieved as the largest wealth manager in the world. Unfortunately, that may not be what investors and market participants remember him for."

... and other casualties

PETER WUFFLI chief executive, UBS: Marcel Ospel is not the first casualty at UBS. Last autumn, Mr Ospel was trying to manoeuvre Mr Wuffli into position as the next chairman, but the board revolted, citing Mr Wuffli's disappointing performance as the credit bubble burst.

STAN O'NEAL chairmanand chief executive, Merrill Lynch: In five years at thehelm, Mr O'Neal replacedMerrill's paternalisticreputation with a strategyof risk-taking, but the pushinto exotic new trading areas proved disastrous.

CHUCK PRINCE chairman and chief executive, Citigroup:

Mr Prince was fired by the banking behemoth on 4 November after presiding over $6bn (£3bn) of write-downs that proved to be the tip of the iceberg. In July he said Citi was "still dancing" in the leveraged buy-out markets, but they froze just a week or two later.

JIMMY CAYNE chairman, Bear Stearns: When two of Bear Stearns' mortgage-focused hedge funds collapsed last summer, he sacked his deputy, Warren Spector. Revelations Mr Cayne spent the crisis on the golf course forced him into a ceremonial role in January.

ZOE CRUZ co-president, Morgan Stanley: Morgan Stanley suffered the biggest single trading loss of the credit crisis, after a bet on different types of mortgage securities blew an $8bn hole in the company's profits. Chairman John Mack sacked Ms Cruz in November as the scale of the losses became apparent.

Stephen Foley

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