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Shell CFO Peter Voser director of two corporate giants whose reputations left in tatters after financial scandals: Shell and UBS

Financial Times: UBS faces three-year fight for reputation

By Chris Hughes and Peter Thal Larsen in London and Haig Simonian in Zurich
Published: April 16 2008 00:02 | Last updated: April 16 2008 06:06

UBS faces years of struggle to restore its reputation in the wake of the damage wrought by its troubled investment banking unit, the Swiss bank’s newly appointed chairman warned ­yesterday.

“We shouldn’t fool ourselves,” said Peter Kurer. “We can’t pretend that there has been no reputational damage. Experience says it goes away after two or three years.”

The frank assessment comes after UBS, once one of the world’s most trusted banks, suffered more than $37bn (£19bn) of writedowns because of its exposure to the US mortgage market to become Europe’s biggest casualty of the credit turmoil.

It has tried to repair the damage by announcing a capital injection from the Government of Singapore Investment Corporation in December and an emergency SFr15bn (£8bn) rights issue two weeks ago.

The appointment of Mr Kurer to succeed veteran banker Marcel Ospel has upset some investors, notably Luqman Arnold, UBS’s former president, who revealed this month he had taken a 0.7 per cent stake in the bank and has launched an activist campaign to overhaul its board.

Mr Arnold says Mr Kurer, the bank’s former general counsel, lacks a banking background and is not independent.

Mr Kurer told the Financial Times such criticism could be seen as “discriminatory” against lawyers. “The bank is an assemblage of specialists and I think I know the place,” he said.

“People should judge me on actions and not concepts. In the UK, you have a very purist approach on governance matters. It is not ideal to elevate someone from the inside, but the board has to evaluate a number of things,” he added.

“I have not accepted this job on an interim basis. The company needs leadership and needs to know who is at the helm.”

However, he said the fact that the post would come up for election each year would allow him to “consider whether it’s for me”.

His comments underscore UBS’s concern to deflect criticism ahead of a shareholder meeting on April 23 when his nomination and the rights issue will be put to a vote.

Some Swiss critics of UBS, such as Ethos, an activist investor, have offered half-hearted support for Mr Kurer, indicating they see him as only a stopgap.

The UBS board yesterday rejected suggestions that it did not conduct an adequate search for a replacement for Mr Ospel and defended the choice of Mr Kurer.

Speaking to the FT, Sergio Marchionne, the bank’s lead independent director and chief executive of Fiat, said: “Peter Kurer was on a shortlist of people we were considering.”

Philipp Hildebrand, deputy chairman of the Swiss National Bank, has also highlighted the “leadership” shown by Mr Kurer during the crisis.

Mr Kurer brushed aside suggestions that the strategy to shrink the investment bank would make it harder to retain staff. “My view is that good people can manage scarce re­sources,” he said.

He said he would support moves by the UBS nominations committee to appoint two “technically proficient people to take a detached, cold look at the risk systems”.

Copyright The Financial Times Limited 2008

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