UBS’s Weber Apologizes for Archegos Loss, Urges Transparency
(Bloomberg) -- UBS Group AG’s Chairman Axel Weber apologized for the loss the Swiss bank posted on its exposure to the collapse of Archegos Capital Management while also blaming a lack of regulation and transparency regarding family offices operating in financial markets.
Switzerland’s largest bank surprised investors last month when it announced an $861 million hit from exposure to Bill Hwang’s family office, weeks after peers had come clean about their losses. Weber called Archegos a very “unusual situation” and said he was “deeply sorry that it happened” during an interview with Bloomberg TV on Wednesday.
Weber said the “usual suspects” of concentration risk and high leverage were present in the Archegos situation and though banks have a lot of information when it comes to some parts of the markets, others such as family offices were deeply lacking in transparency and regulation.
If transparency is not enforced by regulators UBS will enforce it for its own clients. “If we finance activity, we want these disclosures and if clients are unwilling to give that, well there may be other banks that give them that same exposure, but it won’t be us,” Weber said. Still, the bank is not in the business of avoiding risk, but rather seeks to manage it, according to Weber.
“We think what went wrong was various failures interacted as opposed to a specific point where you can point the finger,” Weber said, adding that there was no single person who was solely to blame for the incident and the bank was focusing on improving processes that were lacking.
The loss has triggered an internal investigation at UBS but the bank is so far not subject to any regulator enforcements or actions. Swiss rival Credit Suisse Group AG is under scrutiny by Swiss regulator Finma, which opened enforcement proceedings at the bank after it announced a $5.5 billion hit related to Archegos.
UBS kept quiet on the losses from Archegos for several weeks until the presentation of first-quarter earnings, whereas Credit Suisse had warned investors early. Morgan Stanley was criticized for only revealing its $911 million loss during a scheduled earnings release. UBS said following the earnings release that it didn’t see the need to disclose Archegos early.
The bulk of UBS employees are still working from home globally, with about 20% in critical functions who’ve remained at the office throughout the Covid-19 pandemic, according to Weber. But when the virus subsides, UBS plans to offer case-by-case flexibility to its employees, Weber said.
“We see very little need to be in a race to get back to office,” he said. The new normal will see a greater degree of people in the office but there will be no hard-and-fast rule. Weber said he expects critical roles, and procedures related to trading and controls, to likely remain in the office, adding that high-risk areas need to be monitored in person on the floor or in a similar manner.
The biggest changes will be seen in back-office functions which are more easily done from a remote location. While Weber said he expects front-office roles such as advising clients to return to the office, he also said that interactions with wealth management clients were becoming more digital in a permanent way.
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