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Former UBS Chief Lobbies for Big Change

CNBC.com
Friday, 4 Apr 2008 | 1:45 PM ET

A breakup of Swiss bank UBS would not be possible at the moment but it should be thoroughly restructured to bring it back on course, Luqman Arnold, chairman of investment company Olivant and former president of UBS, told CNBC Europe.

On Thursday, Arnold sent a letter to the UBS board suggesting the sale of the asset management business and the separation of its Wealth Management and Investment Bank units as possible solutions.

Shares of UBS closed 3.3 percnet higher on speculation the troubled bank could take more dramatic steps after being hit hard be the subprime crisis.

"Right now even if you wanted to break it up you couldn't, there is no bank on the planet who would take on its books the investment banking unit," Arnold told "Power Lunch Europe."

UBS is looking to raise 34 billion Swiss francs ($33.5 billion) in capital, after writing down around $37 billion in bad investments borne of a breakneck expansion in investment banking.

Olivant controls 0.7 percent of UBS shares and Arnold said in the letter to the board that the company intends to continue buying shares to increase its percentage ownership.

He said he did not put forward his proposals to other UBS shareholders. "We are getting calls from shareholders now," Arnold told CNBC Europe.

  • Video: Watch the entire Arnold interview (8 mins, 14 secs)

A UBS spokeswoman said the bank had received the letter and will review it.

Private Banking at Risk?

Splitting the good parts from the bad parts is a good idea, because right now its private banking business is at risk, Jacob Schmidt, CEO at Schmidt Research Partners, told "Power Lunch Europe."

"I think there is no doubt that surgery is required. Surgery unfortunately is painful," Schmidt said. "I know of many customers who are leaving UBS because they no longer feel safe."

The one-bank integrated model is very difficult to manage, and the board needs to introduce a greater degree of strategic flexibility for the future, Arnold said when asked if he thought UBS was too big.

"If you look at UBS and Citigroup, there are some similarities here in terms of the size and complexity," he added.

Arnold, who had served as CEO of UBS before being ousted in 2001 after a dispute over strategy with Chairman Marcel Ospel, who resigned this week, also said he was questioning the appointment of in-house counsel Peter Kurer as chairman.

"I think we'd like to see someone run the company who has strategic vision…who has very good communication skills," Arnold said. "It's helpful if he ran a public company and it would be extremely important if he was independent of the past."

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