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UBS AG
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UBS AG (; SWX: ; ) is a diversified global financial services company, with its main headquarters in Basel and Zürich, Switzerland. It is the world's largest manager of private wealth assets, "the world's biggest manager of other people's money" and is also the second-largest bank in Europe, by both market capitalisation and profitability.
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UBS AG (; SWX: ; ) is a diversified global financial services company, with its main headquarters in Basel and Zürich, Switzerland. It is the world's largest manager of private wealth assets, "the world's biggest manager of other people's money" and is also the second-largest bank in Europe, by both market capitalisation and profitability. UBS has a major presence in the United States, with its American headquarters located in New York City (Investment banking); Weehawken, New Jersey (Private Wealth Management); and Stamford, Connecticut (Capital markets). UBS's retail offices are located throughout the U.S., and in over 50 other countries. UBS is an abbreviation, which originated from a predecessor firm, the Union Bank of Switzerland; however, UBS ceased to be considered a representational abbreviation after its 1998 merger with Swiss Bank Corporation. The AG in the company's name means Aktiengesellschaft, which is the equivalent to a shareholder-based corporation in the U.S.
UBS's global business groups are private banking, investment banking, and asset management. Additionally, UBS is one of the leading providers of retail banking and commercial banking services in Switzerland. Overall invested assets are 3.265 trillion Swiss francs (CHF), shareholders' equity is and market capitalization is by the end of 2Q 2007.
In 2007, after incurring huge losses, UBS was forced to turn to the Government of Singapore for fresh funding. Since then, the largest shareholder of UBS is Government of Singapore Investment Corporation. In November 2008, following further dramatic losses, UBS managers pledged to return bonuses. UBS shareholders voted to accept financial aid from the Swiss government, to restore the shaken trust in UBS.
In some ways, UBS has evolved on a similar path to its cross-town rival Credit Suisse. Both are Swiss commercial and retail banks which bought major U.S. investment banks and both are currently investigated by U.S. authorities for allegedly helping 17,000 American citizens to evade taxes. In an unprecedented move on 18 February 2009, UBS, based on an order by the Swiss Financial Markets Supervisory Authority (FINMA), has agreed to immediately provide the United States government with the identities of, and account information for, about 250 American clients and to pay US$780 million in fines and restitution.
History
UBS has its roots as a Swiss bank, originating in 1747, when its first branch was established in the Swiss region of Val Poschiavo. However, the three core components of the company date back to the second half of the nineteenth century. Union Bank of Switzerland, Swiss Bank Corporation, and Paine Webber or their antecedents, were all founded in the 1860s and 1870s.
Modern UBS was formed through a merger of the Union Bank of Switzerland and the Swiss Bank Corporation in June 1998. Although the merged company's new name was originally supposed to be the "United Bank of Switzerland," officials opted to call it simply "UBS" because of a name clash with United Bank Switzerland - a part of the United Bank Limited's Swiss subsidiary.
SBC had previously built a global investment banking business through its acquisitions of Dillon Read in New York and S.G. Warburg in London. The first chairman of the merged bank had to step down in October 1998 due to the Long-Term Capital Management crisis, which affected the Union Bank of Switzerland. In 2000, UBS acquired PaineWebber Group Inc. to become the world's largest wealth management firm for private clients. Invested assets in all wealth management businesses, including the U.S., total CHF 3.265 trillion.
On 9 June 2003, all UBS business groups rebranded under the UBS name as the company began operating as one large firm. UBS Paine Webber, UBS Warburg, UBS Asset Management, and others became simply "UBS". As a result of the rebranding, UBS took a $1B writedown for the loss of goodwill associated with the retirement of the Paine Webber brand. UBS is no longer an acronym but is the company's brand, like 3M. Its logo of three keys, carried over from SBC, stands for confidence, security, and discretion.
Swiss bank UBS AG reported on 1 April 2008, that it expected to post net losses of 12 billion Swiss francs (US$12.1 billion) for the first quarter of 2008 and would seek 15 billion Swiss francs (US$15.1 billion) in new capital. UBS, hard hit by the U.S. Subprime mortgage crisis, also said it sees losses and writedowns of approximately US$19 billion on U.S. real estate and related credit positions. In April 2008 UBS's long term credit ratings were cut to AA- by Fitch Ratings and Standard & Poor's, and Aa1 by Moody's.
On 16 October 2008, UBS announced they had CHF 6 billion of new capital through mandatory convertible notes, fully placed with Swiss Confederation. The SNB (Swiss National Bank) and UBS made an agreement to transfer approximately USD 60 billion of currently illiquid securities and various assets from UBS to a separate fund entity.
On 4 November UBS announced that their third quarter Group net profit was in line with their 16 October pre announcement, with net profit attributable to UBS shareholders standing at CHF 296 million.
This quarter was affected by a further CHF 4.8 billon of write-downs and losses on risk positions, gain on own credit of CHF 2.2m and a tax credit of over CHF 900m.
UBS announced on 12 November 2008 that from 2009 no more than one-third of any cash bonus would be paid out in the year it is earned with the rest held in reserve. Share incentives would also vest after three years, and top executives would have to hold 75% of any vested shares, with share bonus accounts subject to “malus” charges.
It was also confirmed UBS chairman Peter Kurer would no longer have any extra variable compensation – just a cash salary and a fixed allotment of shares, which cannot be sold for four years. This aligned the chairman’s rewards with group performance while minimising risk. UBS also said that Kurer hoped that others would follow his lead. It was possible that regulators and influential groups such as the Financial Stability Forum would help his cause.
In November 2008, UBS put $6 billion of equity into the new “bad bank” entity, keeping only an option to benefit if the value of its assets were to recover. Heralded as a “neat” package by the NY Times, the UBS structure guaranteed clarity for UBS investors by making an outright sale.
On Friday, 30 January 2009, SNB Chairman Jean-Pierre Roth, the head of the Swiss National Bank, was quoted on Reuters as saying that UBS and Credit Suisse are the two best capitalised banks in the world.
On Monday, 9 February 2009, UBS announced that it lost nearly 20 billion Swiss francs (US$17.2 billion) in 2008, the biggest single-year loss in the history of Switzerland.
On Tuesday, 10 February 2009, UBS confirmed the Board of Directors and the Group Executive Board's commitment to each of the UBS business divisions and strategy. Despite difficult market conditions, it was stated that UBS has made substantial progress in adjusting its operations and has prepared itself for the new market environment, with a "substantial reduction" in risk positions during the fourth quarter.
UBS is resolving investigations relating to its US cross-border business by entering into a Deferred Prosecution Agreement with the US Department of Justice and a Consent Order with the US Securities and Exchange Commission. Of the $780 million that UBS will pay, $380 million represents disgorgement of profits from its cross-border business. The remainder represents United States taxes that UBS failed to withhold on the accounts. The figures include interest, penalties and restitution for unpaid taxes. As part of the deal, UBS also entered into a consent order with the Securities and Exchange Commission in which it agreed to charges of having acted as an unregistered broker-dealer and investment adviser for Americans.
Operations
UBS is present in all major financial centers worldwide, with offices in 50 countries. According to the UBS website, the bank had 81,557 employees on 30 June 2007. The 2007 Q2 report breaks these Financial Business permanent staff down by region as: 27,315 in Switzerland, 31,933 in the Americas, 13,355 in Europe, the Middle East and Africa (EMEA / not including Switzerland), and 8,954 in Asia and Australasia (APAC).
UBS is organized in four business groups:
Global Wealth Management & Business Banking, Investment Bank, Global Asset Management, and Corporate Center.
One of the more unusual businesses operated by UBS AG is the UBS Polybahn, a funicular railway in Zürich, Switzerland. The group's ownership of this line dates back to 1976, when the Union Bank of Switzerland rescued the then-failing funicular company.
Management
The Board of Directors is the most senior corporate body with ultimate responsibility for the strategy and the management of the company and for the appointment and supervision of its executive management. Its members are:
- Chairman UBS: Peter Kurer
- Independent Vice Chairman and CEO Fiat S.p.A, Turin, and Fiat Group Automobiles: Sergio Marchionne
- Ernesto Bertarelli
- Group Human Resources Director, BP plc: Sally Bott
- Founder and Chairman, Horizon21: Rainer-Marc Frey
- Chairman, Swiss Life Holding: Bruno Gehrig
- Partner, Lévy Kaufmann-Kohler: Gabrielle Kaufmann-Kohler
- Helmut Panke
- William G. Parrett
- David Sidwell
- CFO, Royal Dutch Shell plc: Peter Voser
- President and CEO, DKSH Holding Ltd: Joerg Wolle
The Group Executive Board is the executive body of the company. Its members are:
Chairman Marcel Ospel did not seek re-election at the 23 April 2008, annual general assembly of shareholders and was succeeded by Peter Kurer, who was general counsel, the bank said, in a statement on 1 April 2008. On 26 February 2009, Marcel Rohner resigned and was succeeded by Oswald Grübel. On 4 March 2009, UBS announced that chairman Peter Kurer would be succeeded by Kaspar Villiger in April.
Competition
Main competitors are Deutsche Bank, Fortis, Citi, Morgan Stanley, Credit Suisse, Banc of America Securities LLC, Goldman Sachs, Dresdner Kleinwort, Julius Baer, Merrill Lynch and JP Morgan Chase.
Workplace
Diversity
UBS was named one of the 100 Best Companies for Working Mothers living in the U.S. in 2006 for the fourth consecutive year by U.S. based Working Mother magazine. It is a member of the Stonewall Diversity Champions scheme and has active Gay and Lesbian, ethnic minority, and women's networking groups. UBS was included on Business Week's The Best Places to Launch a Career 2008, and ranked #96 out of the 119 total companies listed.
Records
The UBS trading floor in Stamford, Connecticut holds the Guinness World Record as the largest securities trading floor in the world. The operation has arched ceiling freeing it of columns or walls. The size of three football fields, it is home to 1,400 traders and staff who handle about $1 trillion worth of transactions a day. It is roughly wide by long. UBS officials have boasted that a Boeing 747 jet could turn around in it.
Major sponsorship deals
Controversies
Destruction of WW2-era archives
- In January 1997, Christoph Meili, a night watchman at the Union Bank of Switzerland (a predecessor bank of today's UBS), found employees destroying archives compiled by a subsidiary that had extensive dealings with Nazi Germany, in direct violation of a recent Swiss law (adopted on 13 December 1996) protecting such material. UBS acknowledged that it had "made a deplorable mistake", but maintained that the destroyed archives were unrelated to the Holocaust. Meili was suspended from his job at the security company that served UBS, following a criminal investigation into whether his whistleblowing had violated bank secrecy laws.
Swissair bankruptcy
- In 2001, UBS was blamed for refusing to extend Swissair's line of credit, forcing a grounding of Swissair's planes on 2 October 2001. UBS Chairman Marcel Ospel was blamed by many for ostensibly evading the request for an extension of Swissair's line of credit, and the day after the grounding, thousands of demonstrators marching in front of the Swissair headquarters carried a banner reading "Bin Ospel" (comparing him to Osama bin Laden because of the effect of his actions on airlines' business).
Securities law violations
- In April 2002, Bank of America sued five people who left its asset- and mortgage-backed securities groups for UBS, alleging that the five conspired to steal trade secrets, proprietary software and clients from Bank of America. Bank of America filed a lawsuit for US$ 20 million against Shahid Quraishi, Peter Faigl, Paul Scialabba, Reggie DeVilliers, and Daniel Huang, who had previously worked for their asset-backed group based in Charlotte, North Carolina.
- On 20 March 2003, UBS client HealthSouth and its founder/CEO Richard M. Scrushy were accused by the U.S. Securities and Exchange Commission (SEC) of an accounting scandal where the company's earnings were falsely inflated by $1.4 billion. In 1996, Scrushy allegedly instructed the company's senior officers and accountants to falsify company earnings reports in order to meet investor expectations and control the price of the company's stock. In certain fiscal years, the company's income was overstated by as much as 4700 percent. The $1.4 billion represents more than 10 percent of the company's total assets. Three senior bankers at UBS Howard Capek, Benjamin Lorello and William McGahan, all whom had extremely close relationships with HealthSouth's management, all testified for congressional hearings, but none was convicted of any wrongdoing. McGahan, who was in jeopardy of losing his employment with the firm at the height of the scandal, later resigned on 10 April 2004 for "personal" reasons not related to the scandal.
- On 10 May 2004, UBS was fined $100 million by the U.S. Federal Reserve for illegally transferring funds from an account set up by the Federal Reserve at UBS to Iran, Cuba and other countries presently under a U.S. trade embargo.
- The Securities and Exchange Board of India alleged that UBS had played a role in the 2004 Black Monday stock market crash which followed the National Democratic Alliance government’s defeat in the general elections. SEBI's ruling of 17 May 2005, barred UBS from issuing or renewing participatory notes for a period of one year. The ban was later lifted on appeal, as a result of a government tribunal ruling on 9 September 2005.
- In an article published in BusinessWeek on 26 February 2007, it was announced that the firm was under investigation by federal prosecutors in the United States after it was discovered that traders working for at least two unidentified hedge funds were paying a UBS employee for information on impending ratings changes on stocks. It was later announced on 1 March, that Mitchel S.Guttenberg, an executive director in the firm's equity research department, was being charged along with 13 other individuals from various firms with insider-trading fraud of more than $15 million.
- In an article published by Reuters on Feb. 23, 2008, Brazilian public prosecutor Karen Kahn announced that several employees of UBS as well as others from Credit Suisse, Clariden Leu and AIG were under investigation by federal authorities. In 2007, police arrested 20 people, including bankers at UBS, Credit Suisse unit Clariden and AIG Private Bank after the discovery of illegal activities including money laundering, tax evasion, fraudulent banking and operating without a banking license.
- On 15 January 2009, the website Swissinfo.ch reported that French wealth management group Oddo et Cie sued UBS on 14 January 2009 in court in Luxembourg for € 30 million over loss of investment due to alleged UBS exposure to the Bernard Madoff hedge funds.
- On 20 January 2009, French prosecutors opened an investigation on behalf of French citizens and institutions who claim losses due to Madoff. One part of the investigation is over the AlphaLux fund set up by UBS, which counters that the bank set up the Luxembourg-based fund at the request of investors, but that Madoff was never on UBS's list of preferred investments.
Discrimination lawsuits
- In April 2005, UBS lost the high profile case Zubulake v. UBS Warburg, a discrimination and retaliation suit. The plaintiff Laura Zubulake, a former institutional equities saleswoman at the company's Stamford office, alleged her manager, Matthew Chapin, had undermined and removed her from professional responsibilities, excluded her from business outings, belittled her to colleagues and generally treated her different from the men on her desk. Also, she alleged that there were several sexist policies in place, such as entertaining clients at strip clubs, that made it difficult for women to foster business contacts with clients. An important event in the case was that UBS had not preserved relevant e-mails after the litigation hold had been in place. Because of this, federal judge Shira Scheindlin gave the jury a final "adverse inference" instruction, in part stating, "The fact that some UBS employees failed to preserve their e-mails after being instructed to do so, and that such e-mails cannot now be produced, is sufficient circumstantial evidence from which you are permitted, but not required, to conclude that the missing evidence was unfavorable to UBS.". The jury found in favor of Zubulake on both claims and awarded $9.1 million in compensatory damages (including back pay and professional damage), and $20.2 million in punitive damages. The case was seen as a landmark in the realms of e-discovery, document retention, computer forensics, and human resources.
- On 18 October 2005, three African-American employees filed a class action lawsuit against the company in the United States District Court for the Southern District of New York alleging racial discrimination in hiring, promotion and other employment practices. The three plaintiffs in Freddie H. Cook, Sylvester . and Timothy J. Gandy v. UBS Financial Services, Inc., claim that segregation and discrimination in job assignments and compensation were widespread and the firm had done nothing to diversify its workforce. The lawsuit also claims offices operating in Largo, Maryland and Flushing, New York were illegally created to serve African-Americans and Asian-Americans respectively, and that the firm’s management frequently ridiculed the Largo branch office and its staff, referring to it as a “diversity” office. On 23 April 2007, U.S. District Judge, Peter J. Messitte, granted plaintiff's request to dismiss the class allegations without prejudice. As a result of this dismissal, the case now comprises the individual claims of three plaintiffs.
2007-2009 Subprime crisis
- During the third quarter of 2007. Peter Wuffli stepped down as CEO of the firm amid significant writedowns related to subprime banking exposure (CDO's/derivatives) in the United States. More than US$13 billion in mezzanine debt and more than US$20 billion in total subprime exposure were written off, forcing UBS to cut its dividend or increase capital in order to protect UBS's traditionally high tier 1 capital ratio, seen by investors as a key to its credibility as the world's largest wealth management company.
- On 1 April 2008 UBS announced that it was writing down a further $19 billion on its investments in American subprime and other mortgages, as part of an unexpected SFr12 billion projected loss in the first quarter. The Swiss bank also said it would call on its shareholders to supply SFr15 billion in additional funds to shore up its depleted reserves of capital. That means shareholders face dilution, and UBS's sovereign-wealth backers may add to the potential losses (albeit paper ones) they have suffered since December. In penance, Marcel Ospel, architect of the merger that created UBS in 1998, said he would step down as chairman, to be replaced by Peter Kurer, the bank’s general counsel. With only 86% approval this appointment was controversial at the shareholders meeting. As reported by the Wall Street Journal, there were many "boos and hisses" upon the announcement of Kurer's appointment.
- On 6 May 2008, UBS announced plans to cut 5,500 jobs by the middle of 2009.
2008-2009 U.S. tax fraud controversy
- It was reported on 22 June 2008 that the US Federal Bureau of Investigation had made a formal request to travel to Switzerland to probe a multi-million-dollar tax evasion case involving UBS. The New York Times reported that the case could involve some 20,000 US citizens. This is reported to be a consequence of information revealed in 2006 by a UBS client at risk of prosecution for US tax evasion.
- On 17 July 2008, the United States Senate disclosed that the U.S. loses around $100 billion annually due to offshore tax evasion. The Senate report accused Swiss bank UBS AG and Liechtenstein's LGT Group for allegedly marketing tax-evasion strategies to wealthy Americans. U.S. clients hold about 19,000 accounts at UBS, with an estimated $18 billion to $20 billion in assets, in Switzerland, according to the findings from the Senate probe and Justice Department prosecutors.
- UBS had announced on 17 July 2008, that it would cease providing cross-border private banking services to US-domiciled clients through its non-US regulated units.
- On 12 November 2008, UBS confirmed that Raoul Weil, Chairman and CEO of UBS Global Wealth Management and Business Banking and member of the Group Executive Board, has been indicted by a Federal grand jury in the Southern District of Florida in connection with the ongoing investigation of UBS's US cross-border business by the United States Department of Justice. Weil has relinquished his duties pending the resolution of this matter. Marten Hoekstra, Deputy CEO of Global Wealth Management & Business Banking and Head of Wealth Management US, has assumed Raoul Weil's duties in the interim. On 13 January 2009, in an article about the Bernard Madoff scandal, the Associated Press reported "In a separate case also affecting wealthy investors, former UBS AG wealth management chief Raoul Weil was formally declared a fugitive on Tuesday after failing to surrender to U.S. authorities on charges of conspiring to help wealthy Americans hide assets to avoid paying taxes."
- On 18 February 2009, UBS agreed to pay a fine of $780 million to the U.S. Government and entered into a deferred prosecution agreement on charges of conspiring to defraud the United States by impeding the Internal Revenue Service (IRS). In an unprecedented move, UBS, based on an order by the Swiss Financial Markets Supervisory Authority (FINMA), has agreed to immediately provide the United States government with the identities of, and account information for, certain United States customers of UBS’s cross-border business. In addition, the Securities and Exchange Commission charged UBS with "acting as an unregistered broker-dealer and investment advisor" and filed an enforcement action against the corporation.
- On 19 February, the U.S. government filed suit against UBS to reveal the names of all 52,000 American customers, alleging that the bank and these customers conspired to defraud the IRS and federal government of legitimately owed tax revenue. If UBS does not comply with the approved summons, it could be in default of its deferred prosecution agreement, potentially opening itself and its senior executives to indictment. The Swiss People's Party (SVP) called for retaliation against the United States, and for an urgent debate in Parliament on ways to protect Swiss banking secrecy from "further foreign blackmail".
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