Risk Management

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Melanie Rodier
Melanie Rodier
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Resignation of UBS Chief Quite A Turnaround

The resignation marked a striking fall for Gruebel, a former chief executive at Credit Suisse where he was known as "Saint Ossie".

Nine days after the UBS rogue trading scandal broke, the Swiss bank's CEO Oswald Gruebel, finally stepped down.

The resignation marked a striking fall for Gruebel, a former chief executive at Credit Suisse where he was known as "Saint Ossie" for reviving the bank. Gruebel was plucked out of retirement by UBS two and a half years ago.

Gruebel's sudden retirement is quite a turnaround for the CEO. Last week, he refused to step down, saying calls for his resignation were "purely political." In an interview with Swiss newspaper Der Sonntag, he said he assumed responsibility for all that happens at the bank. But asked whether he felt guilty about the multi-billion dollar scandal, he said "No."

Instead he implied that the $2.3 billion loss that sent shockwaves through financial markets – and firms' risk management departments – was no one's fault but 31-year-old trader Kweku Adoboli, the trader who went 'astray.' Gruebel reportedly said that it would have been "impossible to catch the rogue through risk management controls since he was acting criminally".

“I did not take the step of resigning lightly,” he wrote in an e-mail to staff on Saturday. “I am convinced that it is in the best interests of UBS to approach the future with a new leader.”

Matt Samelson, principal at Woodbine Associates, speculates that the UBS board forced Gruebel out. "[..] What other choice does the UBS board have? If they were to fire the CEO it would do nothing to assuage the situation. After all, the board is responsible for governing the organization by establishing broad policies and objectives, selecting, appointing, supporting and reviewing the performance of the chief executive and accounting to the shareholders for the organization's performance. Firing him would simply make them look foolish and irresponsible," he says.

So did Gruebel have direct knowledge or control over the risk management procedures that went so badly wrong?

Without inside knowledge it is difficult to say. But it is unlikely that he did, Samelson argues.

"Still, he should have a risk management chief reporting to him or the president and it is incumbent upon the president or CEO to understand - at a high level - what is going on and that the institution risk control is adequate," he continues.

"He obviously failed to do that - given his earlier statement along the lines of "criminal activity wouldn't be detected by a risk management framework". That kind of statement suggests he lacked an understanding of enterprise risk management - not something you want in a CEO."

Melanie Rodier has worked as a print and broadcast journalist for over 10 years, covering business and finance, general news, and film trade news. Prior to joining Wall Street & Technology in April 2007, Melanie lived in Paris, where she worked for the International Herald ... View Full Bio
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