UBS chief executive Oswald Gruebel has resigned over a $2.3 billion rogue trading loss, the Swiss bank announced today, ending days of speculation.
The board of directors asked UBS Europe chief Sergio P. Ermotti to take over immediately as interim CEO until Gruebel's replacement is appointed, the bank said in a statement.
"The Board regrets Oswald Gruebel's decision," UBS Chairman Kaspar Villiger said, according to the statement.
"Oswald Gruebel feels that it is his duty to assume responsibility for the recent unauthorized trading incident. It is testimony to his uncompromising principles and integrity," Villiger said.
Villiger thanked Gruebel on behalf of the board of directors for "having helped make UBS one of the world's best capitalized banks."
"He achieved an impressive turnaround and strengthened UBS fundamentally," Villiger said.
London-based UBS securities trader Kweku Adoboli, 31, was arrested last week and charged with fraud and false accounting for the unauthorized trades, which led to a $2.3 billion loss. On Thursday, a judge ordered him to be held in jail until a hearing next month.
Adoboli started working for UBS as a trainee investment adviser in March 2006 and has had no disciplinary action taken against him previously, according to the Financial Services Authority register of advisors, as reported by the Press Association.
Erin Davis, senior stock analyst with Morningstar, said it seems Adoboli worked in the back office until he was promoted to the trading floor, which points to "below average" risk controls at the bank.
"A lot of banks won't allow that kind of promotion explicitly to avoid creating this kind of opportunity. It appears that the trader, because of his back office experience, was able to bypass the risk management systems," she said.
According to the statement, the board of directors will implement measures to prevent such incidents from reoccurring.
"We are committed to further expanding our already leading global wealth management franchise. The Investment Bank will continue to strengthen its alignment with UBS's wealth management businesses, in addition to serving its corporate, sovereign and other institutional clients," Villiger said. "In the future, the Investment Bank will be less complex, carry less risk and use less capital to produce reliable returns and contribute more optimally to UBS's overall objectives."
During the financial crisis, UBS lost nearly 30 billion Swiss francs, or $34.5 billion, and had to be bailed out due to its investments in low-quality assets, especially U.S. subprime mortgages. As a result, UBS raised more than $5 billion from the Swiss government and it was permitted to transfer up to $60 billion in distressed assets to a fund supported by Switzerland's central bank.
Davis said UBS' private bank is its "crown jewel," and its main challenge in recent years has been to regain its clients' trust, but it has had only "moderate success." The bank's net new asset inflows, while now positive, are weak relative to its competitors.
ABC News' Susanna Kim contributed to this report.