April 1, 2008 / 12:09 PM / 12 years ago

Top Swiss banker goes after subprime losses

LONDON (Reuters) - UBS Chairman Marcel Ospel, whose resignation was announced on Tuesday, threw in the towel after the Swiss bank said it was seeking its second emergency capital injection in a matter of months as its subprime losses soar.

The logo of UBS AG is pictured behind a traffic light at its building in central London April 1, 2008. REUTERS/Alessia Pierdomenico

Ospel, vituperated in the Swiss media as the man responsible for a disastrous venture into U.S. subprime mortgages, survived a barrage of criticism from angry shareholders at a company meeting little more than a month ago.

But news that UBS was writing down an additional $19 billion in ailing assets, bringing the total cost of its subprime fiasco to a staggering $37 billion, was too much even for the resilient Ospel to bear.

Time finally ran out for the wily 57-year-old banker who bulldozed his way to the top from humble beginnings in Basel, on Switzerland’s border with Germany, and leaves UBS in the biggest crisis in its history.

Calls for Ospel’s head have been mounting in the Swiss media for months as charges on the bank’s subprime exposures piled up, and newspapers had been openly naming possible successors. UBS proposed its company lawyer, Peter Kurer, should succeed Ospel.

Among other candidates mooted by Swiss newspapers, Fiat FIA.MI Chief Executive Sergio Marchionne effectively ruled himself out when he agreed to become the bank’s non-executive vice chairman but said he would not accept an executive role.

Deutsche Bank (DBKGn.DE) Chief Executive Josef Ackermann — who is Swiss — and central bank Vice-President Philipp Hildebrand had also been mentioned. But Ackermann had said he was not interested and Hildebrand was thought unlikely to give up his influential policymaking role.

BAD NEWS

The flow of bad news from UBS culminating in Tuesday’s announcement had been relentless. The bank announced $4 billion in fresh writedowns at the end of January little more than six weeks after a shock $10 billion charge in mid-December.

Ospel, who became UBS chairman in 2001 after cutting his teeth in securities trading with U.S. investment bank Merrill Lynch and then moving to UBS predecessor SBC, is not a well-loved figure in Switzerland.

Swiss tabloid daily Blick ran a highly critical front-page story in 2006 publicizing Ospel’s salary, which at a reported 26 million Swiss francs ($23.57 million) made him the highest-paid corporate executive in Switzerland.

A Swiss banker at a smaller rival private bank in Zurich, who knew Ospel at school, said before the resignation announcement that Ospel’s position had become unsustainable and that his departure was overdue.

“His time is over. You cannot preside over a disaster like this without accepting responsibility,” said the banker, who spoke on condition of anonymity.

UBS shareholders at an extraordinary meeting in February approved an injection of 13 billion Swiss francs ($12.91 billion) in fresh capital from Singapore and an unnamed Middle East investor. They also accepted a dividend payment in shares rather than cash.

UBS is now the biggest casualty of the meltdown in U.S. subprime mortgages, which are loans made to borrowers with poor credit histories.

Ospel had removed most of UBS’s top management since the subprime debacle broke. CEO Peter Wuffli stood down in July and was replaced by Marcel Rohner, who until then had been running the bank’s wealth management business. UBS later replaced its chief financial and risk officers.

The subprime crisis has also claimed high-profile victims in rival financial institutions, piling pressure on Ospel to go.

Citigroup’s head, Charles Prince, and Merrill Lynch CEO Stan O’Neal have been some of the biggest casualties, both forced out last year after the banks they ran took hefty charges.

Editing by Quentin Bryar

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