* Ex UBS chiefs quizzed by UK lawmakers probing banks
* One says bosses negligent for not finding Libor rigging
* Ex CEO Rohner denies his leadership was negligent
By Steve Slater and Katharina Bart
LONDON/ZURICH, Jan 10 The former chief executive
of UBS blamed "mercenaries" for its role in the global
interest-rate rigging scandal that has further undermined the
Swiss bank's once venerable reputation.
UBS was fined a record $1.5 billion last month for
manipulating Libor interest rates, the latest in a string of
debacles - including a $2.3 billion rogue-trading loss and a tax
avoidance row with the United States - that have rocked
Switzerland's largest lender.
"In these pockets where we had these problems it wasn't
probably a bad culture, but it was a lack of culture," Marcel
Rohner told a British parliamentary panel investigating banking
standards in the wake of the Libor scandal.
"When you grow a business too quickly you hire people from
many different places and some of them ... you really have to
qualify as mercenaries," he told the panel on Thursday.
Panel members accused Rohner and three other former UBS
executives of gross negligence and incompetence for failing to
detect the manipulation, which stretched back to 2005 a n d
occurred when each of them had been in charge of the bank's
"The level of ignorance seems staggering to the point of
incredulity," said Andrew Tyrie, who heads up the Parliamentary
Commission on Banking Standards (PCBS). "Not only were you
ignorant of what was going on, but you were out of your depth."
All four executives said the first they had heard of UBS's
involvement in rigging Libor was from press reports in 2011.
Investigations by British, Swiss and U.S. regulators
revealed rate manipulation on what the U.S. authorities called
an "epic" scale.
UBS brokers and managers conspired with brokers to rig the
rates to make money and openly boasted about what they were
doing in emails and electronic chat rooms. Five internal audits
failed to detect what was going on.
SHOCKED AND ASHAMED
Rohner said he was shocked and ashamed when he read about
the rigging, but said during his period as CEO he was trying to
save the bank from collapse and was unaware of the misconduct.
He denied his leadership had been negligent.
"The times I was leading this institution were so extreme I
was fighting permanently for survival," the Swiss national said
in often heart-felt testimony. "I did the best I could."
Rohner was CEO for 20 turbulent months between 2007 and
2009, when UBS repeatedly had to tap shareholders for cash as it
was forced to write down more than $50 billion worth of
mortgage-related investments during the global financial crisis.
Thursday's panel session was the first public appearance by
the 48-year old since he left the bank. He has not returned to
Tyrie thanked Rohner and the other executives for showing
contrition but panel member John McFall said they were like
Captain Renault, the police captain in the film Casablanca.
"I would suggest you knew that gambling was going on and you
went out the door with much more winnings than Captain Renault."
The British financial watchdog said interest rate rigging
was so widespread at UBS that every submission it made over a
six-year period from 2005 to 2010 inclusive was suspect.
Libor, the London interbank offered rate, is used as a
benchmark for pricing trillions of dollars of loans globally.
Even small inaccuracies in the rate affect investment returns
and borrowing costs, meaning UBS and other banks implicated in
the rigging scandal are at risk of costly civil lawsuits.
TANTAMOUNT TO STEALING
More than a dozen banks are under investigation in the Libor
probe and further settlements with regulators are expected this
year. Barclays paid a fine of $453 million for its role
in the interest rate manipulation last year.
Under persistent questioning, Jerker Johansson, who headed
the investment bank for just over a year from 2008, admitted
management had been negligent not to detect the misconduct. He
said the manipulation was tantamount to stealing.
UBS's new investment banking chief had on Wednesday outlined
how the bank was axing 10,000 jobs and closing much of its
fixed-income arm to focus on its flagship private banking
Rohner said pay structures needed to be linked to group
profits and banks needed to be simplified and shrunk to avoid
He said the two-tier board structure in place at many
European banks, including UBS, did not work well during crises.
"It was dysfunctional. It means the supervisory board has
all the responsibility but cannot act operationally ... that
made the decision making a complete nightmare."
The PCBS, a cross-party panel of lawmakers, is expected to
make recommendations on reforming the banking sector to
government and the industry before the end of March.
The committee cannot compel the banks or the government to
act, but its views are influential and Tyrie signaled its
recommendations would be far-reaching.
"We've got to do far more than change the structure of
banks. We fundamentally have to reform the governance, incentive
structure and the overall supervisory approach right across the
global financial industry," he said.
Thomson Reuters, parent company of Reuters, has been
calculating and distributing Libor rates for Libor's sponsor,
the British Bankers' Association, since 2005.