Oswald Grübel: Swiss banks’ rescuer who falls on rogue trading

It was to former Credit Suisse boss Oswald Grübel that UBS turned when the bank was struggling to stem its record losses amid the financial crisis and seek a way out of its bitter tax evasion spat
with the United States.

Grübel had engineered Credit Suisse’s own recovery in the early 2000s, after the bank took massive charges arising from the Enron scandal. Within a year, the bank returned to profitability.

Likewise at UBS, Grübel managed to restore the bank’s profitability around 18 months after he took over the helm.

However, Grübel has now been forced to resign after UBS was hit with an internal crisis on his watch — the discovery of unauthorised trades allegedly made by trader Kweku Adoboli which lost the bank $2.3 billion.

Born November 13th 1943 in eastern Germany, Grübel entered the banking industry as an apprentice at Deutsche Bank.

He later joined White Weld Securities, a subsidiary of Schweizerische Kreditanstalt, the former name of Credit Suisse, and became a member of the Credit Suisse executive board in 1991.

Grübel retired at the end of 2001 but was brought back just six months later as the head of Credit Suisse financial services.

Swiftly, he was asked to take over as joint CEO in September 2002 during Credit Suisse’s darkest hour.

It was his reputation at the rival bank that led UBS to rouse Grübel out of his retirement for the second time.

In the statement announcing that he was to take over from Marcel Rohner, the bank said: “With his previous employer Credit Suisse, Mr Grübel was the architect of a successful turnaround and restored confidence in the company in turbulent times.”

Within minutes of taking the reins, the straight talking banker told his staff that massive cost cuts were imminent.

Since 2009, the bank has slashed thousands of jobs, cutting the bank that was getting too large to govern to size.

Investors heaved a sigh of relief when the bank not only became profitable again in the third quarter of 2010, but also stemmed an outflow of client assets for the first time since the financial crisis.

Mindful of the public resentment against bankers with fat pay checks, Grübel, nicknamed “Ossie”, voluntarily renounced his bonuses for 2009 and 2010.

While he may have won the respect of investors and employees, the German recently ruffled some feathers when he criticised the Swiss National Bank for its move to put a cap on the franc’s rate against the euro.

The trading scandal at UBS has also made some question his leadership style.

UBS’ honorary chairman Nikolaus Senn criticised Grübel for his over-reliance on the controls system to uncover problems, instead of going to get a proactive grip on the situation.

“I don’t know how many times Oswald Grübel flew to London in order to understand from the managers on site what was going on,” Senn told Swiss German television.

The Financial Times meanwhile quoted an unnamed trader saying that the problem was that “no one questions Ossie.”

UBS said on Saturday its board “regrets” Grübel’s decision to quit but Chairman Kaspar Villiger said he “feels that it is his duty to assume responsibility for the recent unauthorised trading incident.”

Villiger praised Grübel for “his uncompromising principles and integrity”, and acknowledged that during his tenure “he achieved an impressive turnaround and strengthened UBS fundamentally.”

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Switzerland’s UBS faces €3.7-billion fine as crucial court ruling looms

A Paris court will rule Wednesday on whether Swiss banking giant UBS illegally tried to convince French clients to hide billions of euros in Switzerland, charges which prompted prosecutors to seek a record €3.7-billion fine.

Switzerland's UBS faces €3.7-billion fine as crucial court ruling looms
UBS denies charges it helped French clients evade tax and says it will defend itself "vigorously". Photo: AFP

The trial opened last autumn after seven years of investigations, launched when several former employees came forward with claims of unlawful conduct. 

The move came as authorities across Europe cracked down on tax evasion and dubious banking practices in the wake of the global financial crisis which erupted in 2007.

The pressure eventually forced Switzerland to effectively end its tradition of ironclad bank secrecy, by joining more than 90 countries which agreed to automatically share more client account information among each other.

In the UBS case, French authorities determined that more than €10 billion had been kept from the eyes of tax officials between 2004 and 2012.

The National Financial Prosecutor's office urged a €3.7-billion ($4.2 billion) fine, the largest ever sought in France, saying the bank and its directors “were perfectly aware that they were breaking French law” by unlawfully soliciting clients and helping them evade French taxes.

They also sought a €15 million fine for UBS's French subsidiary, and fines of up to €500,000 for six top executives, including Raoul Weil, the former third-in-command at UBS, and Patrick de Fayet, formerly the second-ranking executive for its French operations.

In addition, lawyers for the French state, which is a plaintiff in the case, asked for €1.6 billion in damages.

UBS, which was ordered to post €1.1 billion in bail, has denied the charges and said its operations complied with Swiss law.

It also says that it was “unaware” that some French clients had failed to declare assets in Switzerland, and that prosecutors have not produced any proof, such as client names or account numbers, to back up their fraud claims.

The case is being closely watched by industry executives at a time when Paris and other European capitals are hoping to lure multinational banks from London as Brexit looms.

'Milk tickets'

UBS is accused of organising or inviting prospective clients to prestigious outings such as the French Open or luxury hunting retreats, where UBS's Swiss bankers would meet their “prospects” — something they were not allowed to do under French law.

UBS France directors then used notes called “milk tickets” to keep track of how many “milk cans” – amounts of money – were transferred to Swiss accounts.

They say the system was merely a way to balance out bonuses due to French bankers who were effectively losing a client to their Swiss peers, and the notes were later destroyed.

But investigators claim the “milk tickets” were proof that UBS had a parallel accounting system for keeping the transfers off its official books.

Only one “milk ticket” was found during the inquiry, prompting defence lawyers to argue there was no proof to justify claims of a massive fraud.

Yet prosecutors pointed to the roughly 3,700 French UBS clients who later took advantage of an amnesty offer to regularise their tax declarations with the French authorities.

UBS has been embroiled in a series of similar cases, most notably in the United States, where the authorities said the bank used Switzerland's banking secrecy laws to help rich clients avoid taxes.

In 2009 it paid $780 million to settle charges it helped thousands of American citizens hide money from the Internal Revenue Service, and agreed to turn over information on hundreds of clients, severely denting Switzerland's long tradition of shielding banking clients and their operations from prying eyes.

That case was also prompted by a former American UBS employee turned whistleblower, Bradley Birkenfeld, whose book “Lucifer's Banker: The Untold Story of How I Destroyed Swiss Bank Secrecy” was published in 2016.

Last November UBS was again sued by US authorities, who accuse the bank of misleading investors over the sale of mortgage-backed securities in 2006 and 2007, just before the financial crisis struck.

UBS has denied the charges and said it will defend itself “vigorously”.