Former Bundesbank chief Axel Weber has asked the German central bank if he can join UBS earlier than planned, in a sign the chairman-designate wants to exert his grip on the bank following a trading scandal, two financial sources with direct knowledge of the matter said.
Weber has been involved top level strategic decision-making at the Swiss banking giant UBS ever since it was hit by a $2.3 billion loss caused by unauthorized trading, one of the sources told Reuters.
Weber will not become chairman of UBS until 2013, thanks to central bank rules that impose a 'cooling off period' on former officials. His request was made informally, the sources said.
Germany's Bundesbank, the European Central Bank and UBS declined to comment on the matter.
Weber declined to comment on his role at UBS when asked by Reuters in Washington on Sunday.
Chief Executive Oswald Gruebel's resignation late last week has left a question mark hanging over the bank's leadership structure and prompted shareholder group Ethos to say it wanted Weber to join the board of directors as soon as possible.
UBS can hold an extraordinary general meeting within a month. The bank has proved in the past that this is possible, Ethos director Dominique Biedermann told Reuters.
Current chairman Kaspar Villiger said at the weekend he intended to remain in that role until 2013 as it would not be good for continuity for the chairman and CEO to leave together.
UBS said Europe chief Sergio Ermotti would act as a stand-in leader until a permanent chief executive can be found.
Shares in UBS climbed as fund managers and analysts digested news that the job of clearing up after the crisis had been handed to Ermotti, who joined UBS in April after being passed over for the top job at Italian bank UniCredit.
Ermotti is not the most risk averse -- he used to make some big trades (at Merrill Lynch.) But he does know how to manage risk, said a Geneva-based investment adviser who has worked with Ermotti in the past. He has the experience and he's motivated.
UBS shares, which staged a relief rally late last week on hopes the UBS board might decide on a big restructuring, were up 2.3 percent at 10.34 francs by 1442 GMT, recovering from initial losses and tracking the European sector banking index which gained 2.2 percent.
Although the new CEO will no doubt take some time to develop a restructuring plan, we believe that hopes of a much more substantial downsizing of the investment bank, freeing up significant capital, will help support the shares in the short term, said Nomura analyst Jon Peace.
The 67-year-old Gruebel resigned on Saturday saying he was taking the blame for the scandal. But there was speculation he had clashed with the UBS board on strategy. Sources close to the negotiations said Gruebel had wanted to keep an integrated bank combining both wealth management and investment banking.
We suspect the board's desire to downsize the investment bank had more to do with it as Gruebel seemed reluctant to do that, said Helvea analyst Peter Thorne.
DZ Bank analyst Matthias Duerr said the bank needed a radical new strategy if it was to minimize a loss of confidence.
We believe a significant reduction of the size of the investment bank or its complete divestiture is likely to become increasingly necessary, he said.
There had been talk that UBS investment banking chief Carsten Kengeter would go rather than Gruebel, though UBS Chairman Kaspar Villiger said he and his team had done an excellent job to limit losses from the unauthorized trades.
Gruebel didn't resign, he was pushed. But maybe it would have been better if Kengeter and the head of risk had paid, a UBS wealth management insider said.
Weber is already involved in the search for a new permanent CEO, Villiger said. He was in Singapore last week to consult with the board, sources close to Weber told Reuters.
The UBS board is looking at other candidates both inside and outside the bank to become the permanent new CEO but Villiger said at the weekend that Ermotti was a strong candidate.
The 51-year-old, who hails from Switzerland's Italian-speaking region of Ticino, has been regarded as a likely candidate for further promotion since he joined UBS in April as head of Europe, Middle East and Africa.
A former Merrill Lynch head of global equity markets, Ermotti has experience both in investment banking and wealth management. While at UniCredit, he is tributed with limiting exposure to the U.S. subprime crisis and cleaning up German bank HVB, which had some 10 billion euros of bad loans when the Milan-listed bank bought it in 2005.
Alessandro Profumo, then UniCredit's head, named him deputy CEO in 2007, in which role Ermotti spearheaded the merger of UniCredit's investment and corporate banking units after the financial crisis, refocusing them on the bank's core businesses of Italy, Germany and central and eastern Europe.
He knows the markets very well, he is very attentive to risk management and he is very attached to the institutions that he works for, Profumo told Il Sole 24 Ore newspaper.
At the top of Ermotti's to-do list for UBS is speeding up the overhaul of the investment bank, along with reviewing risk controls and overseeing an investigation into the huge trading loss, which he said should conclude in the next two weeks.
Villiger said at the weekend he expected the revamp to take two to three years to complete.
(Additional reporting by Martin de Sapinto, Silke Koltrowitz, Catherine Bosley, Rupert Pretterklieber, Albert Schmieder, and Emma Thomasson in Zurich, Silvia Aloisi in Milan, Eva Kuehnen in Berlin, Ed Taylor in Frankfurt and Gernot Heller in Washington; Editing by Sophie Walker)
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