(Adds shareholder votes, comment from activist investor Knight
ZURICH May 7 Shareholders of UBS on
Wednesday backed the board and management despite opposition due
to the bank's involvement in various scandals, including a
global probe into the largely unregulated $5.3 trillion-a-day
foreign exchange market.
Influential proxy advisor Glass Lewis had argued
shareholders should be concerned with the extent of the
burgeoning forex probe, and be mindful of potentially material
fines UBS may have to pay for helping wealthy clients evade
Just over 12 percent of shareholders agreed with Glass
Lewis, while more than 87 percent backed UBS' board and top
Previously an annual formality, the vote to ratify board and
management has increasingly been used as a means of protest by
A yes-vote means the company itself and the shareholders who
vote for it would no longer have the option of pursuing legal
action against them, unless new information came to light.
CRITICISM FROM ACTIVIST SHAREHOLDER
The Zurich-based lender faced shareholders one day after it
announced plans to pay them a special dividend for swapping its
shares into a new holding, to ensure the bank could be broken up
more easily in a crisis.
Slashing risky assets has been a key part of UBS' response
to the Swiss financial regulator's demand for more capital to
underlay those assets.
The bank lowered its risk-weighted assets to 226.8 billion
Swiss francs ($259.05 billion), compared to 302.27 billion
francs at the end of 2008 the year UBS took a state rescue
UBS, which paid $1.5 billion in 2012 to U.S. and European
authorities over alleged efforts to manipulate Libor and other
benchmark interest rates, is 18 months into a three-year revamp.
The plan is to scale back its investment bank and derive the
bulk of profits from its flagship private banking operations in
order to pay richer dividends.
Knight Vinke, an activist investor which has been critical
of UBS' investment bank because it says it threatens the
lucrative private banking business, welcomed some of the
However, Knight Vinke told Reuters it remained concerned the
securities unit is beset with risky assets. The bank has said it
aims for the securities trading part of its investment bank will
soak up roughly 85 percent of the unit's risk-weighted assets,
with the remainder allotted to an advisory arm.
"What we still want to see is the elimination of the trading
assets which still present substantial financial and
reputational risk - and will continue to attract the attention
of regulators," Knight Vinke Vice Chairman David Trenchard told
UBS, which didn't comment, has already come under stronger
Swiss regulatory oversight: last year, the bank was required to
hold 22.5 billion francs in extra reserves against potential
litigation and fines.
SCATHING PAY VOTE
UBS' pay practices also faced stiff opposition, though
shareholder votes are not yet binding. More than 11 percent of
UBS shareholders voted against the bank's bonus plan, while
nearly 86 percent backed it.
At the investor meeting, UBS Chairman Axel Weber and Chief
Executive Sergio Ermotti were grilled, largely by Swiss
shareholders, over pay.
"We also will not rest until our demands on excessive pay
are heard," said retail shareholder Hans-Jacob Heitz, in a nod
to an advertising campaign it launched in 2010, in an attempt to
put some of the scandals behind.
Besides the foreign exchange scandal, UBS is mired in
several others, including claims it misrepresented
mortgage-backed bonds during the U.S. housing bubble and back
taxes due to Brazil, dating back to when the Swiss lender owned
an investment bank in the country.
CEO Ermotti asked shareholders for more time to clean up.
"We are in a good position and doing the right thing, but we
have not yet seen the end of all issues from the past - they
will continue to cost the industry and us time and effort,"
Ermotti told shareholders.
On Tuesday, UBS told shareholders it still expects
"elevated" spending to resolve its past. The global forex probe,
still at an early stage, is among UBS' biggest problems because
the Swiss bank is the world's fourth-biggest currency trader,
according to a Euromoney poll.
"We do not believe there is sufficient evidence yet that the
company's risk controls are robust enough to warrant ratifying
the board and management acts," Glass Lewis wrote to
shareholders ahead of the meeting, in a recommendation seen by
($1 = 0.8755 Swiss Francs)
(Reporting By Katharina Bart. Albert Schmieder contributed
reporting.; Editing by Joshua Franklin and Louise Heavens)