The AG in the company's name means Aktiengesellschaft, which is the equivalent to a shareholder-based corporation in the USA.
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 US investment banks (and in the case of UBS, a leading retail stock broker, PaineWebber).
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 June 9th, 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.[3]
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 June 30, 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).
Management
The Group Executive Board is the executive body of the company.[4] Its members are:
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.
UBS North American headquarters building in Stamford, Connecticut: Trading floor is beneath bowed roof
Records
The UBS trading floor in Stamford, Connecticut holds the Guinness World Record as the largest securities trading floor in the world. The 103,000 square-foot operation has 40 foot 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 227 feet wide by 410 feet long. UBS officials have boasted that a 747 jet could turn around in it.
In full-year 2006, UBS reported net profit attributable to UBS shareholders (?attributable profit?) of CHF 11,253 million, with CHF 11,249 million from continuing operations and CHF 4 million from discontinued operations.
Swiss bank UBS AG told April 12008 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$19 billion on U.S. real estate and related credit positions.http://edition.cnn.com/2008/BUSINESS/04/01/ubs.losses.ap/index.html In April 2008 UBS's long term credit ratings were cut to AA- by Fitch Ratings and Standard & Poor's, and Aa1 by Moody's.
In January 1997, Christoph Meili, a night watchman at the Union Bank of Switzerland (as UBS was then known), found the bank historian destroying archives compiled by a subsidiary that had extensive dealings with Nazi Germany, in direct violation of a recent Swiss law (adopted on December 13, 1996) protecting such material. UBS acknowledged that it had "made a deplorable mistake", but maintained that the destroyed archives were unrelated to the Holocaust. Meili was suspended from his job at the security company that served UBS, following a criminal investigation into whether his whistleblowing had violated bank secrecy laws.[6]
In 2001, UBS was blamed for refusing to extend Swissair's line of credit, forcing a grounding of Swissair's planes on October 2, 2001. UBS Chairman Marcel Ospel was blamed by many for ostensibly evading the request for an extension of Swissair's line of credit, and the day after the grounding, thousands of demonstrators marching in front of the Swissair headquarters carried a banner reading "Bin Ospel" (comparing him to Osama bin Laden because of the effect of his actions on airlines' business).[7]
In April 2002, Bank of America sued five people who left its asset- and mortgage-backed securities groups for UBS, alleging that the five conspired to steal trade secrets, proprietary software and clients from Bank of America. Bank of America filed a lawsuit for US$ 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.[8]
On March 202003 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 [9], later resigned on April 10, 2004 for personal reasons not related to the scandal. [10]
On May 10, 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. [11]
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.[12] 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 judgeShira 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.[13][14]
The Securities and Exchange Board of India (SEBI) 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 May 17, 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 September 9, 2005.
On October 18, 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 L. Flaming Jr. 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 April 23, 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. [15][16]
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.[17] 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.[18]
In an article published in BusinessWeek on February 26, 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.http://www.businessweek.com/bwdaily/dnflash/content/feb2007/db20070226_521857.htm?chan=top+news_top+news+index_businessweek+exclusives It was later announced on March 1st, 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. [19]
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 April 1st, 2008 UBS announced?and 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 May 6th, 2008 UBS announced plans to cut 5,500 jobs by the middle of the next year.[20]
It was reported on June 22, 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.[21] 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[22].
On July 17, 2008 the US Senate disclosed that the U.S. loses around $100 billion annually due to offshore tax evasion.[23] The Senate report accused Swiss bank UBS AG and Liechtenstein's LGT Group for allegedly marketing tax-evasion strategies to wealthy Americans.[24] 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.[25]
References
Nolmans, Erik (Nov. 14, 2005). "UBS Fastens its Seatbelts". Fortune, p. 20.
Vincent, Isabel. Pursuit of Justice. New York: Morrow, 1997.
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