Last updated: January 9, 2013 7:39 pm

UBS’s Orcel admits banks must change

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Chief Executive Officer of UBS, Andrea Orcel arrives at Portcullis House in London©Reuters

Andrea Orcel, head of the Swiss group's investment banking arm

Bankers have become too arrogant and the industry must change, the chief executive of UBS’s investment bank told British lawmakers on Wednesday.

Addressing the Parliamentary Commission on Banking Standards, Andrea Orcel said the bank, which in December was fined $1.5bn for its involvement in rigging the Libor benchmark borrowing rate, was overhauling its culture and was “serious about putting integrity over profit”.

“We all got probably too arrogant, too self-convinced that things were correct the way they were – I think the industry has to change,” Mr Orcel admitted. UBS, he said, was “trying to recover the honour and standing that the organisation had in the past”.

In a string of scandals that ran in parallel with the Libor abuses, UBS’s investment bank also lost $38bn on credit derivatives in the 2008 financial crisis and failed to prevent rogue trader Kweku Adoboli from losing $2.3bn. Separately, the bank paid a $780m fine to US authorities over a tax evasion scandal by private clients.

The Swiss bank is now on a mission to shrink and anchor its operations around its successful wealth and asset management franchises. Late last year it announced it would cut 10,000 jobs and wind down its fixed-income business.

Mr Orcel was giving evidence to the panel of MPs and peers as part of an assessment of bank behaviour and ethics. The commission, chaired by Conservative MP Andrew Tyrie, has switched its focus after spending the past three months looking at structural reform.

Mr Orcel said 18 UBS employees involved in the Libor scandal had been sacked. Forty others had been disciplined. The bank was still assessing the impact that Tom Hayes, one of two UBS traders charged by prosecutors over the Libor affair, had on the business.

“Clearly his [Mr Hayes’] conduct was reprehensible and we are all disgusted by it,” said Andrew Williams, UBS’s global head of compliance, who was appearing alongside Mr Orcel. The bankers said they did not yet know how much of the $260m of profits generated by Mr Hayes during his three years at the bank had been attributable to Libor manipulation – something that Mr Tyrie said he was “surprised and disappointed” by.

Mr Orcel admitted to regrets over his role as adviser to Royal Bank of Scotland when the UK bank made the disastrous acquisition of Dutch rival ABN Amro for £71bn at the peak of the debt boom in October 2007.

Mr Orcel, who was working for Merrill Lynch at the time of RBS’s bid for ABN, said: “If we’d known what we know today, we would have advised them not to proceed.”

The deal was the largest cross-border takeover of all time, but left RBS with too little capital to absorb losses, eventually forcing it to be rescued by taxpayers.

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