Archive for September, 2011

New UBS boss seeks fresh start after trading

Sunday, September 25th, 2011 | Finance News

ZURICH (Reuters) – The new interim boss of UBS has been charged with reorganizing its investment bank, a task which will take two to three years to complete, its chairman said on Sunday, after CEO Oswald Gruebel quit over the $2.3 billion rogue trading scandal.

The UBS board on Saturday accepted the resignation of German-born chief executive Gruebel, 67, and appointed as his interim replacement Sergio Ermotti, who hails from Switzerland's Italian-speaking region of Ticino.

The board is looking at both internal and external candidates to fill the post permanently and Chairman Kaspar Villiger told a newspaper on Sunday ex-Bundesbank head Axel Weber has already been involved in the CEO selection process as an independent advisor.

But Weber is still not due to take over as UBS's chairman until 2013, Villiger said.

He also said that Ermotti, the suave former UniCredit banker who joined UBS in April as head of Europe, Middle East and Africa, and has worked in London and New York, is a strong candidate to remain as CEO, Villiger said.

"He has lots of experience and brings a lot of what's needed to run the bank. I also think it's good that he's Swiss," Villiger told the NZZ am Sonntag.

With the Swiss public losing its patience with the country's biggest bank after a series of crippling crises, Ermotti's nationality may give him an edge over competitors and help him deal with politicians and regulators.

Villiger said the board has already asked Ermotti, who was passed over for the CEO job at Italy's UniCredit, to speed up a scaling back of the investment bank.

"Revamping the bank will probably take the next two or three years until it's all completed," Villiger said.

Villiger, a former Swiss finance minister who also faced calls to resign over the scandal, said in a conference call with reporters on Saturday that the bank was sticking to plans for Weber to join the board next year and take over as chairman in 2013.

He reiterated that point on Sunday.

"It's not optimal for the president and the chief executive to step down at the same time. This way Axel Weber has the chance to get up to speed, Villiger told the NZZ.

"He'll also live in Switzerland and get to know the Helvetic characteristics. We see no reason to change this plan."


Gruebel, a banking industry veteran who helped turn around UBS's cross-town rival Credit Suisse, was brought out of retirement to try to revamp UBS after it almost collapsed in 2008 under the weight of more than $50 billion lost on toxic assets.

His decision to take responsibility for the latest $2.3 billion loss and step down was welcomed by several Swiss politicians. The Swiss parliament looks set to enact new capital adequacy standards for big banks that go beyond the Basel III rules.

Earlier this year Gruebel criticized the regulatory plan and the Swiss National Bank's decision to cap the strong Swiss franc at 1.20 per euro to shield the economy from a downturn.

Gruebel's resignation was "not surprising and right," Christophe Darbellay of the center-right Christian Democrats (CVP) told the NZZ am Sonntag.

Darbellay also said he approved of the decision to appoint a Swiss CEO, telling the paper, "Swiss values will be good for UBS."

Yet to MP Christoph Moergeli of the right-wing, anti-immigrant Swiss People's Party (SVP), Villiger should have gone instead, making room immediately for Weber, he told local media.

(Editing by Greg Mahlich)


ECB undecided on length of debt-buying program: Paramo

Sunday, September 25th, 2011 | Finance News

MADRID (Reuters) – The European Central Bank has not decided how long its unconventional interventions in the secondary market for European government debt will go on, Executive Board Member Jose Manuel Gonzalez-Paramo said in an interview on Sunday.

The debt purchases were approved by an overwhelming majority at the ECB's board and were not influenced by governments, Paramo said in an interview with Spanish newspaper ABC.

"We will decide what future the program has, but we did not start this program as an answer to political demands at all, we are the most fiercely independent institution in the world," Paramo told ABC.

The ECB reactivated its bond-buying program in August month ago to help hold down surging borrowing costs in Italy and Spain, which had been inflated by financial turbulence and speculation on government debt.

Paramo defended the central bank's record on controlling inflation against critics who suggest it should be focusing more on price stability than buying government debt on secondary markets.

"No central bank has been more scrupulous with price stability than the ECB ... sometimes central banks develop their monetary policy by buying and selling public assets to maintain price stability."

Europe's leaders need reminding of the commitments they made on July 21 to create a new form of EU governance and accelerate reforms, for which strong leaders are required, the ECB board member said.

"The road map is clear; what is needed is to speed up the journey and for that you need very strong leadership."

Turning to Spain's problems of high unemployment Paramo said fiscal discipline and market reform are key to creating jobs in Spain, which has one of the highest levels of unemployment in the euro zone.

"The path is still fiscal discipline and generating confidence in markets and pushing through reforms ... This is the key to creating jobs during an economic slowdown.

Spain's government has overhauled its banking system, forcing weak savings banks to seek private capital or face nationalization, and has also pushed through measures to cut its public debt, and to a lesser extent, reformed its labor market.

"In the labor market they have made reforms like someone cutting salami, although experience tells us that it is better to do them at the same time and once and for all," Paramo said.

Paramo also said Spain's energy market, which he described as too expensive, and its commercial distribution market were sectors ripe for reform.

The ECB board member accepted that banks bear much responsibility for the economic crisis in Spain and elsewhere with cheap mortgages and other lending but said that punishing them could lead to huge unemployment, lower living standards, and a lending squeeze.

"If one just follows the principle that the ones who did wrong should pay (for their mistakes) then the results can be unacceptable," he said.

(Reporting By Jonathan Gleave; Editing by Greg Mahlich)


Russia says better to save Greece from a default

Saturday, September 24th, 2011 | Finance News

WASHINGTON (Reuters) – Saving Greece from a default would be better for the euro zone countries and ease the threat of similar developments in Spain and Italy, Russia's Finance Minister Alexei Kudrin said on Saturday.

"It is better to save (Greece)," Kudrin told journalists at the sidelines of global policymakers' semi-annual meeting in Washington.

"Risks of the world economy would increase drastically and interest on Italy and Spain's debt would increase dramatically and it would be harder for them to service their debt. It's like at the front: breaking the front even narrowly already weakens the entire army and brings the enemy within," Kudrin said.

The European Union's top economic official, Olli Rehn, said as soon as the region's governments confirm new powers for their 440-billion-euro fund, known as the EFSF, attention will turn to how to get more impact from the existing money.

(Reporting by Lidia Kelly, editing by Will Dunham)