Interview with UBS Chairman Axel Weber 'We Have Learned Our Lesson'

In a SPIEGEL interview, UBS board chairman Axel Weber says his bank is better prepared than most others for new, stricter capital requirements. UBS has learned from the mistakes of the financial crisis, he says, and explains why the Swiss financial giant has moved away from investment banking.

Christmas lights illuminate an office building of Swiss bank UBS in Zurich.

Christmas lights illuminate an office building of Swiss bank UBS in Zurich.

SPIEGEL: Mr. Weber, how much of the money of German tax dodgers is still in accounts at UBS?

Weber: Switzerland must undoubtedly address the way it handled illegal money in the past. I still believe that the tax treaty with Germany is the right approach for this, even though it failed to make it through the German Bundesrat the first time around. For Switzerland, it's a matter of €10 billion ($13 billion), which would be paid to the German treasury as part of the treaty. The calculation includes the Swiss application of an average tax rate of more than 25 percent.

SPIEGEL: So based on your numbers, we're talking about €40 billion. To what extent does this affect UBS?

Weber: It's not us, but our customers who are affected. But we support the treaty and have hopes for the mediation committee.

SPIEGEL: The chances for success look slim. What will you do if the treaty falls apart once and for all? Will you throw out tax-evading customers?

Weber: The German finance minister wouldn't choose the path through the mediation committee if he didn't see a chance of saving the treaty. But if it fails nonetheless, we will certainly appeal even more strongly to our customers. We already support them in the effort to come clean with their taxes retroactively for 10 years. UBS doesn't want a clean-money strategy. It needs a clean-money reality.

SPIEGEL: For many citizens, it violates their sense of justice to see people who moved their assets to Switzerland years ago without paying taxes now getting off relatively scot-free.

Weber: Let me remind you that in 2003, the Social Democrats in Germany pushed through a tax amnesty at an effective rate of 15 percent. I can't understand why so few customers took advantage of that opportunity at the time. Now there's a second offer on the table, at 25 percent, which I believe many will now accept. With or without a treaty, there will be no getting around compliance with the tax laws.

SPIEGEL: Norbert Walter-Borjans, the finance minister of the western German state of North Rhine-Westphalia, has announced that if the treaty is off the table, Germany will take a similarly aggressive approach against tax evaders as the United States. Does this worry you?

Weber: I'm meeting Mr. Walter-Borjans for dinner this week, and I'm looking forward to it. After all, as Bundesbank president, I saved North Rhine-Westphalia's state-owned bank at least three times …

SPIEGEL: ... so you're saying that the state still owes you something?

Weber: No, but we have good relations, and we both know that there are sometimes issues lying dormant in banks that have to be talked about. There is no disagreement between the Germans and the Swiss over the goal of clearing up the tax problems. The only disagreement is over how we get there.

SPIEGEL: UBS's new strategy is focused on asset management. Is this the right approach, given the harm the tax scandal has done to your reputation?

Weber: I was in Singapore, Hong Kong and Sydney a few weeks ago, and in Dubai and Abu Dhabi in the last few days. UBS's global customers are very satisfied with the bank.

SPIEGEL: Speaking of Singapore, doesn't the country present a good opportunity for your customers to escape growing regulation in Switzerland?

Weber: Singapore has among the strictest regulations for the acceptance of customer funds and one of the most rigid sanction regimes for tax evaders. German Finance Minister Wolfgang Schäuble has just renewed the double taxation treaty between Germany and Singapore. We welcome our new customers in Singapore just as we do in Switzerland.

SPIEGEL: How do you welcome new customers? What would you do if we showed up here with a suitcase full of money?

Weber: I would probably accompany you out the back door and ask you to take you money to the tax office. Our customers must confirm that the money they invest with us was properly taxed. We make them aware of the sanctions they could face if this is not the case.

SPIEGEL: At UBS, you haven't just inherited the dispute over the tax treaty, but also the scandal surrounding the trader Kweku Adoboli, the LIBOR affair over manipulated interest rates and other problems. How tainted was the culture you encountered here?

Weber: Many of the issues you mentioned are not problems specific to UBS. However, with Adoboli …

SPIEGEL: … the UBS securities trader whose speculative deals in London led to a loss of more than a billion euros …

Weber: … that was not the case. The verdict speaks for itself. He was given a very tough prison sentence and financial sanctions were imposed on the bank. We have learned our lesson and changed the processes through which we monitor risks in securities trading. For us, that brings the case to a close.

SPIEGEL: But the Swiss Financial Market Supervisory Authority (FINMA) has deployed a watchdog to your bank. Does it distrust you?

Weber: FINMA sent an auditor as an independent third party, who is monitoring the implementation of our measures. The authority has no doubt that we have massively improved our risk management. The fact is, however, that CEO Sergio Ermotti and I found UBS to be in a sorry state in many respects. All of the weaknesses in risk management will be corrected by the end of the year. This means, for example, that we will be technically capable of gaining an overview of the total risk to the group in every corner of the bank and with every deal that we make.

SPIEGEL: So it will no longer be possible for a trader like Adoboli to gamble away billions?

Weber: It isn't enough to ensure that one specific incident is not repeated. We need a risk control system that permits no blemishes and ensures that mistakes are recognized shortly after they happen. But in a bank with 60,000 employees, you can never completely rule out the criminal misconduct of individuals.

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