The 3 things UBS must do

Today’s stunning announcement by UBS that a rogue trader lost $2 billion presents big communications challenges for the Swiss bank. It will need to be forthcoming with regulators about the reasons for the loss and the breakdown in the bank’s internal controls. It must reassure private clients that their assets are safe, keep valued employees from fleeing and address investor concerns about the scale of risk-taking in the investment bank – all while trying to rebuild its businesses during a very rocky time in the markets.

Clearly UBS has to answer some very tough questions about how the bank’s risk-management processes could have failed so miserably. The bank’s London management will also come under scrutiny. They’d be expected to have very strong procedures and controls, since they operate in London’s highly regulated domain.

The issue will continue to make headlines until UBS does these three things:

1.  Describes in detail the manner in which the loss occurred and was undetected by its risk controls
2.  Announces changes in its personnel and procedures to prevent a similar occurrence in the future
3.  Holds senior managers accountable, either by suspending them pending a full investigation or terminating them for cause, making them ineligible for severance and other exit payments

While the bank’s public statement in Zurich this morning was very brief, the bank was a little more forthcoming in its internal announcement, urging employees to remain focused on clients and reiterating the “fundamental strengths” of the firm.  UBS will need to keep communicating in the weeks ahead in order to come through the crisis successfully.

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One thought on “The 3 things UBS must do

  1. Pingback: UBS: Pressure mounts after trading loss | Risk Matters

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