UBS to Release 10,000 Staff as Trading Business Shrinks
**UBS Planning Major Restructuring**
Citing a close source, Reuters reported on 26 October that Swiss investment bank UBS AG (NYSE:UBS) is expected to cut up to 10,000 jobs, or 16 per cent of its workforce, over the next three to five years, as it contends with rising capital requirements and weakening competiveness. Switzerland’s biggest bank is expected to make the cuts across the firm globally, but the bulk of the job losses are likely to occur in its hard-hit trading and investment banking departments.
UBS’s board will meet today (29 October) to weigh up the restructuring programme, which foresees the gradual closure of large parts of its fixed income trading operations. Under the planned restructuring, the investment bank will instead focus on easier to understand and capital-light equities and foreign exchange trading as well as advisory functions. UBS’s fixed income trading business would be brought into a non-core unit, which would be run by the current co-head of UBS, Carsten Kengeter, and would be wound down over time. The official announcement of the new strategy is set to be made when UBS reports its third-quarter results on Tuesday.
**Ermotti’s Boldest Move Triggered by Pressure from Swiss Regulators**
UBS’s most recent plan represents the boldest move yet by UBS’s chief executive Sergio Ermotti to adapt to a radically changed regulatory and market environment that has left the investment bank with lower returns and much higher capital needs for certain business areas. The investment bank’s CEO has already taken steps to reduce staff at the fixed income trading unit and wind down other activities, but what is being contemplated now goes much further than any previous move.
!m[Bleak Times for Investment Bankers with Few Trading Options](/uploads/story/661/thumbs/pic1_inline.png)Like other Swiss securities firms, UBS has recently been struggling to boost profitability as client activity and trading remain sluggish. In an effort to meet regulatory capital requirements, risk-weighted assets at UBS’ investment bank are already in the process of being slashed by more than half from their levels in September 2011, with most of the cuts made in the fixed-income area. The latest UBS restructuring, however, is a much more drastic next step that Mr Ermotti is ready to execute in response Swiss regulators’ intensifying pressure to boost capital and reduce trading and investment-banking operations.
**UBS’s Trading Business Weaker than Rivals**
Amongst the strictest in the world, the capital demands of Swiss regulators are also making it difficult for UBS to compete in capital-intensive businesses such as fixed-income trading. According to the Financial Times, citing analyst at Deutsche Bank Matt Spick, UBS had a market share in fixed income, currencies and commodities trading of 3.9 per cent in the first half of this year. This compares with 11.2 per cent at JPMorgan, 9.9 per cent at Citigroup and 9 per cent at Barclays.
By Deyana Ivanova
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