UBS ex-CEO leads campaign to shake up bank

Pressure on beleaguered Swiss bank UBS AG to break up intensified as activist investor and former chief executive officer Luqman Arnold demanded to shake up its governance and structure.

Mr Arnold seeks to oust the newly named chairman, sell off asset management and the Brazilian division Pactual, and place the rest into a holding company with a view to selling investment banking and reducing the group to its wealth management rump.

"UBS's reputation has been comprehensively destroyed by proprietary trading activities totally divorced from any client business," Mr Arnold said in a letter yesterday.

Mr Arnold's investment group, Olivant, said it controlled over 0.7 per cent of UBS's capital. That would make him one of the top 10 investors in the world's largest wealth manager, the bank hardest-hit worldwide from the subprime crisis.

UBS has rejected calls for sweeping changes, saying its dual focus on investment banking and wealth management is sound.

The bank has already swept out management and seeks to raise a total of $33.5 billion in capital, after writing down around $37 billion in bad investments made in a breakneck expansion in investment banking.

But in a letter sent to supervisory board member Sergio Marchionne - currently chief executive officer of automaker Fiat SpA - Mr Arnold said the measures fall short.

The group needs to sell more assets to raise capital and overhaul its corporate governance to make its board of directors non-executive rather than executive. Mr Marchionne himself should become chairman to lead the changes, Mr Arnold said in the letter.

"Arnold's logic for breaking up the bank cannot be faulted and events of the last year just confirm that. The core private banking franchise of UBS has been put under threat by the previous management's infatuation with investment banking," said analyst Peter Thorne at brokerage Helvea.