Switzerland's UBS AG has yet to purge itself fully of the culture of arrogance that put it at the centre of a global interest rate scandal, its investment banking chief said on Wednesday.
The once-venerable Swiss bank was fined a record $1.5-billion last month for manipulating Libor interest rates, the latest in a string of scandals including a $2.3-billion rogue-trading loss and a damaging tax avoidance row with the United States.
"We all got probably too arrogant, too self-convinced that things were correct the way they were – I think the industry has to change," Andrea Orcel told Britain's Parliamentary Commission on Banking Standards, set up after the Libor affair.
"I am convinced that we (UBS) have made a lot of progress. I am also convinced that we still need to do more."
British bank Barclays PLC paid a fine of $453-million for its role in the interest rate manipulation and more banks are expected to make settlements this year.
Mr. Orcel said that UBS had fired 18 of the 40 or so people deemed by Britain's Financial Services Authority to have been involved in the Libor rigging from 2006 to 2009. Libor, the London interbank offered rate, is used as a benchmark for pricing trillions of dollars of loans.
Most of the remaining UBS staff implicated in the scandal, including Tom Hayes, a trader charged by U.S. prosecutors with conspiracy, wire fraud and antitrust violation, had already left the bank, Mr. Orcel said.
Andrew Williams, UBS's global head of compliance, told the committee that U.S. bank Citigroup had headhunted Hayes from UBS before the Libor scandal broke, prompting laughter in the committee room.
"What kind of reference did you give him?" Nigel Lawson, Britain's former Chancellor, asked Mr. Williams.
"I believe he would have just got the standard reference," Mr. Williams replied, adding that the bank's management was shocked by subsequent revelations about the manipulation of Libor.
"Clearly, his (Hayes's) conduct was reprehensible and we are all disgusted by it," the head of compliance said, but added that U.S. charges brought against Hayes and another former UBS employee limited what could be said.
Mr. Hayes, who is estimated to have made $236-million for UBS from 2007 to 2009 at the bank's Toyko office, no longer works for Citigroup. Reuters has been unable to contact the Briton.
Mr. Orcel, who joined UBS in July, has been investment bank chief since November and is overseeing 10,000 job cuts and a retreat from fixed income.
He blamed a decade-long expansion at UBS for creating an unwieldy organization with sometimes rotten corporate practices.
"There are certainly elements of our cultures which are negative and which we need to root out and are in the process of rooting out," he said.
Investigations by British, Swiss and U.S. regulators revealed interest rate manipulation on an "epic" scale. UBS brokers and managers conspired with brokers to rig the rates to make money and openly boasted about what they were doing.
"Think of me when yur on yur yacht in Monaco," one broker told a UBS trader.
Committee member Justin Welby, the incoming Archbishop of Canterbury, asked Orcel if he was the right man to turn around UBS's investment banking business.
"I feel I have a high level of integrity," he replied.
Mr. Orcel, deemed a "deal junkie" by one committee member, was previously at Merrill Lynch, where he was criticized for taking a $34-million pay package in 2008 after advising on the disastrous RBS-led takeover of ABN AMRO.
The Italian admitted that with the benefit of hindsight he would have advised RBS against the £71-billion ($114-billion U.S.) deal, which eventually forced the bank into a state bailout when its capital reserves came up short during the credit crunch.
Mr. Orcel told the committee that UBS is working at simplifying the investment banking business to make it less risky, but he admitted that scandals were always a risk.
"I would love to tell you it won't happen again, but I can't tell you it won't happen again," he said.
The committee, a cross-party panel of MPs headed by Conservative MP Andrew Tyrie, is switching its focus to standards and culture after spending most of the past three months assessing structural reform.
Mr. Tyrie on Wednesday described the Libor rigging as "a shocker of enormous proportions".
Former UBS chief executive Marcel Rohner will appear before the MPs on Thursday, flanked by Huw Jenkins, Jerker Johansson and Alex Wilmot-Sitwell, three former heads or co-heads of UBS's investment banking division.
Thomson Reuters, parent company of Reuters, has been calculating and distributing Libor rates for Libor's sponsor, the British Bankers' Association, since 2005.