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UBS bank's revamp after trading scandal to take years

Sep 25, 2011, 8:13 a.m.
Sergio Ermotti speaks during an interview with Reuters in downtown Milan July 14, 2010. REUTERS/Stefano Rellandini

Opposition to Gruebel's strategy of a banking group focusing both on wealth management and investment banking had been rising in recent months, the newspaper said.

The Swiss parliament also looks set to enact new capital adequacy standards for big banks that go beyond the Basel III rules, and Gruebel made sharp criticisms of the plan earlier this year. UBS has said it will not pay a dividend as it seeks to shore up capital to comply with the new rules

Ermotti said on Saturday UBS will use its investment bank to service its private banking clients, scaling back but not exiting the fixed income business.

"Without restructuring, over half of UBS's capital base will be tied up in fixed income when investors want to buy a fabulous Swiss asset and wealth manager with a profitable but materially smaller brokerage operation," said Morgan Stanley analyst Huw van Steenis, adding UBS should refocus on areas such as equities and M&A.

Gruebel's decision to step down following the $2.3 billion loss was also welcomed by several Swiss politicians on Sunday and the center-left Social Democrats (SP) last week pushed for a ban on risky investment banking during a parliamentary session debating the 'Too Big To Fail' higher bank capital requirements.

The trading scandal showed risk controls were inadequate, and Gruebel's stepping down was a first step forward, prominent SP-member Susanne Leutenegger Oberholzer told local agency AWP.

For Pirmin Bischof of the center-right Christian Democrats, Gruebel's resignation and Ermotti's promotion meant UBS was keen to steer a new course.

"Gruebel couldn't identify with the 'Too Big To Fail' package," AWP quoted Bischof as saying, adding that Gruebel could sense the times were changing. "And for this new epoch he wasn't the right figure head."

(Additional reporting by Steve Slater and Philipp Halstrick; Editing by Greg Mahlich)

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