Toomre Capital Markets LLC

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Former UBS President Urges Bank Break-up

Late on Thursday April 3rd 2008, news emerged that c/a>, a former president of troubled Swiss bank UBS AG, is pushing for a potential break-up of the bank, according to a letter Mr. Arnold and his London investment firm Olivant Advisers Ltd. in London have sent to UBS's board late on this date. Mr. Arnold served as president of UBS in 2001 before departing the bank after a dispute with current Chairman Marcel Ospel. This is a surprise move and is likely to accelerate changes at UBS, particularly regarding its investment banking division.

Luqman Arnold is quite a credible individual. After leaving UBS, Mr. Arnold joined U.K. lender Abbey National PLC as executive before overseeing the sale of Abbey to Spain's Banco Santander SA. As The Wall Street Journal details, today Mr. Arnold's firm Olivant Advisers Ltd. specializes in financial services.

As Toomre Capital Markets LLC ("TCM") has written in the post UBS: How About $19 Billion More in Write-downs?, TCM wonders "when UBS will be issuing the press release that they no longer have a fixed-income sales and trading business. Or perhaps that will never come as this global bank continues to demonstrate its complete and utter (in)competence? One has to wonder what part John Costas and the ill-fated Dillon Read Capital Management had in these losses." How UBS as an institution allowed itself to take on some $100 billion in mortgage and structured credit assets that have resulted in write-downs thus far of approximately $38 billion is simply incomprehensible.

To be charitable, one has to wonder just what role, if any, the UBS board had in the Enterprise Risk Management practices of the bank. Were they completely asleep at the switch? Perhaps they would do well to seriously consider Mr. Arnold's proposal. Time will tell about whether UBS will be any presence at all in the global fixed-income and capital markets businesses.