After enduring huge losses last year, a former executive at Swiss bank UBS called for a sharp shift in strategy that would split up the company, reject the currently appointed Chairman, and rebuild the company's culture for managing risk.
The former president Luqman Arnold, who left the company in 2001 and now chairs investment company Olivant Advisers Ltd, sent a letter to UBS yesterday outlining his plans for reform. Olivant currently controls about 0.7 percent of shares in UBS.
UBS stock rose more than 3 percent after the news.
In the past year, UBS has taken about $38 billion in write downs related due to bad investments in debt securities, leading to a massive loss in its market value. As a result, this week UBS announced that its current Chairman Marcel Ospel will step down and took steps to raise $15 billion in capital.
In his letter, Arnold said raising the additional capital on its own may not be sufficient to resolve the company's problems.
We are not convinced that the 'one bank' integrated business model that has served UBS well in the past will survive the damage inflicted by the proprietary trading losses and write-downs, he added.
In his letter, Arnold advised that the company should separate its wealth management division and business banking unit from the investment bank. He said that the new strategy would give the company more focused management.
He also doubted the effectiveness of the company's decision to appoint a company insider as the next Chairman. While he viewed current board member, Peter Kurer, as an outstanding General Counsel for the company, Arnold felt he lacked the skills to lead the board.
His appointment perpetuates UBS's ineffective corporate governance and insular culture, he explained.
He also criticized the risk management ability of the current supervisors, noting that only strengthening risk control systems at the company would not be enough. He proposed a fundamental rebuilding of an effective risk culture which he said the proposed chairman and supervisors do not have.