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Sergio Ermotti helped the bank recover after the 2008 financial crisis, but faces a tougher task this time.
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By Andrew Ross Sorkin,Ravi Mattu,Bernhard Warner,Sarah Kessler,Michael J. de la Merced,Lauren Hirsch and Ephrat Livni
A Swiss chief returns
UBS unexpectedly said on Wednesday that it was bringing back Sergio Ermotti as C.E.O., as the Swiss bank begins the tough task of digesting its archrival, Credit Suisse.
It’s another sign of how tricky UBS considers the work of taking over its main competitor, via a $3.2 billion deal that continues to draw blowback from investors and Swiss lawmakers alike.
The move had been in the works for days. Colm Kelleher, UBS’s chairman, said at a news conference that he first called Mr. Ermotti to discuss a potential return on March 20, less than a day after UBS announced it was buying Credit Suisse. Mr. Ermotti, who left UBS in 2020, will replace Ralph Hamers on April 5.
The UBS board determined that “for this massive integration exercise, Sergio would be the better pilot for the next part of this voyage,” Mr. Kelleher said.
Mr. Hamers will stay on for an unspecified period as an adviser to help with the transition. At the news conference, Mr. Hamers — whose background is in retail banking, not investment banking or wealth management — said he understood that the Credit Suisse deal had changed things.
Mr. Ermotti helped revive UBS before. From 2011 to 2020, the Swiss banker led the firm’s effort to come back from its lows following the 2008 financial crisis, refocusing it on wealth management and scaling back riskier businesses in investment banking and trading. That — along with the years of scandals and missteps that have dogged Credit Suisse — made UBS the clearly larger and more stable of Switzerland’s two banking giants.
In seemingly prophetic comments, Mr. Ermotti told a Swiss newspaper in September that there was no “compelling” reason for Switzerland to have two banking giants.
But overseeing the integration of Credit Suisse will be more difficult. As Mr. Kelleher noted at the news conference, it’s the first deal that would combine two global systemically important banks. It will require shutting swaths of Credit Suisse’s investment bank and cutting probably hundreds of employees. Neither Mr. Kelleher nor Mr. Hamers would give a number on layoffs; as Mr. Hamers repeatedly emphasized at the news conference, the Credit Suisse deal was just announced a week and a half ago.
Success also requires shielding UBS’s culture against what Mr. Kelleher said were “clearly parts of Credit Suisse that had a bad culture,” alluding to the troubles that brought the smaller Swiss bank to its knees and prompted its fire sale. (Just out: Credit Suisse whistleblowers working with Senate investigators accused the Swiss firm of helping wealth Americans dodge U.S. taxes, violating a 2014 plea agreement with American prosecutors.)
UBS is also hoping to retain some Credit Suisse talent, and certainly prized clients — but competitors are hard at work snatching both. (Anke Reingen of RBC Capital Markets downgraded UBS today and expects a big loss of customers after the deal closes.) Nevertheless, UBS shares rose after Mr. Ermotti’s return was announced.
HERE’S WHAT’S HAPPENING
Jamie Dimon will reportedly testify in Jeffrey Epstein cases. JPMorgan Chase’s C.E.O. will give a sworn deposition in May, in connection with two lawsuits filed against the bank over its retaining the late sex offender as a client, according to The Financial Times. JPMorgan had tried to shield Mr. Dimon from having to testify; it has also sought to hold a former executive, Jes Staley, liable for any financial damages it incurs.
Howard Schultz will testify before the Senate. The former Starbucks C.E.O. will defend the coffee giant’s handling of union organizers: “Starbucks has engaged in good faith bargaining,” he will say according to his prepared testimony. Democratic lawmakers and labor activists have accused Starbucks of illegally seeking to block organizing efforts.
Germany examines Microsoft’s market power. Competition regulators are investigating whether the tech giant qualifies for closer antitrust scrutiny, as Alphabet, Amazon and Meta have. Microsoft was already facing regulatory pressure over its $69 billion takeover of Activision Blizzard.
Apple gets into buy-now-pay-later. The iPhone maker has started rolling out Apple Pay Later to some U.S. customers, allowing them to borrow up to $1,000 to buy products, paid back in four installments without interest. It’s the first financial product that Apple is handling in house — the Apple Card is comanaged by Goldman Sachs — and thrusts the company into a business that has drawn regulatory scrutiny.
Round 2 for banking regulators on Capitol Hill
Representatives of the nation’s top banking authorities — the F.D.I.C., the Fed and the Treasury Department — are set to testify before the House Financial Services Committee at 10 a.m. Eastern about the collapse of Silicon Valley Bank.
If their appearance on Tuesday before the Senate Banking Committee was any indication, expect a grilling by lawmakers about how regulators missed numerous red flags at the lender whose implosion has set off a global banking crisis.
The Fed is in the firing line. Senators from both parties wanted to know why Silicon Valley Bank’s primary regulator didn’t do more to prevent its failure. Democrats pressed Michael Barr, the Fed’s vice chair for supervision, on whether Trump-era lightening of banking regulation was to blame.
Republicans — who have been adamant that new regulations aren’t needed — criticized Fed banking examiners for missing warning signs, or failing to address them. Mr. Barr, a Biden appointee, suggested that the Fed would revisit rules that had been rolled back.
Mr. Barr also gave new details on Silicon Valley Bank’s collapse. He testified the lender was set to suffer some $100 billion in withdrawals on March 10, after having already lost $42 billion in deposits, forcing the F.D.I.C. to take over the bank that morning.
Lawmakers and regulators emphasized punishments for bank executives. Senator Sherrod Brown of Ohio, the committee’s Democratic chair, who faces a tough re-election fight, said he planned to introduce legislation to stiffen penalties and introduce bans for executives at failed banks.
But while regulators said they were limited in their ability to claw back compensation, they emphasized that they can impose financial and other penalties if their investigations uncover wrongdoing.
Crypto’s unlikely rally
Crypto investors are sending digital asset prices higher this morning despite a wave of bad news slamming some of the sector’s biggest names, including new charges against the FTX founder Sam Bankman-Fried.
Binance has been hit by a run of withdrawals. Traders have pulled more than $2 billion out of the world’s biggest crypto exchange in the past week, according to The Wall Street Journal. Despite that, Binance coin, the firm’s in-house token, has climbed nearly 3 percent in the past day. (The company, which was founded by the crypto mogul Changpeng Zhao, has been prone to big outflows since the collapse of FTX.)
The latest exodus comes as the firm’s legal troubles mount. On Monday, the Commodity Futures Trading Commission filed a lawsuit in a Chicago federal court accusing Binance, Zhao and a former chief compliance officer of breaking derivatives trading rules. Another blow to Mr. Zhao’s ambitions: A federal judge temporarily blocked the $1.3 billion acquisition of Voyager Digital, a bankrupt crypto lender, by Binance’s U.S. unit.
And then federal prosecutors accused Mr. Bankman-Fried of bribing Chinese officials. In a new charge filed on Tuesday, they say he offered $40 million to unfreeze trading accounts for Alameda Research, FTX’s sister company. Mr. Bankman-Fried’s lengthy charge sheet already included securities fraud, money laundering and campaign finance violations, and he’s confined to his parents’ home in Palo Alto as he awaits trial.
Here’s what else is happening in crypto:
The F.D.I.C. has given Signature Bank’s crypto clients until April 5 to close their accounts and move their money out of the collapsed lender. Flagstar Bank, a unit of New York Community Bancorp, will buy the failed bank, but not its crypto-related deposits.
The authorities in Montenegro gave Bloomberg new details about Do Kwon, the fugitive crypto founder they arrested last week and continue to hold. He’s wanted in the U.S. and South Korea after the collapse of his Terra/Luna project. He and his traveling companion “told our officials that elsewhere in the world they had been used to V.I.P. treatment,” Interior Minister Filip Adzic said in an interview.
What Alibaba’s big breakup means
Markets welcomed Alibaba’s plan to split itself into six units: Its Hong Kong-traded shares rose sharply on Wednesday, and its New York-listed stock rose more than 14 percent after the news was announced a day earlier.
That reflects hopes that the company is out of the doghouse. Alibaba’s shares have fallen more than 70 percent since the autumn of 2020 when Jack Ma publicly criticized regulators and banks. Chinese officials subsequently launched a broader crackdown on the tech sector. Does the shake-up signal the end of Beijing’s squeeze on tech?
Alibaba’s overhaul is radical. Its new units — including e-commerce, artificial intelligence and digital media — could eventually pursue separate I.P.O.s or even be split off, diluting the overall power of the internet giant.
That will probably please regulators, who gave competition concerns as one reason to crack down on the company. (Alibaba presented its plan to government officials before announcing it, The Financial Times reports).
Chinese tech investors overall may benefit. I.P.O.s of Alibaba divisions, or those of other tech giants that adopt similar plans, could bolster Hong Kong, whose reputation as a global financial center has been hammered by Beijing’s growing control of the semiautonomous city.
Chinese officials have pushed companies whose shares are listed abroad to shift to Hong Kong as part of a “homecoming push,” as Alibaba has already been preparing to do.
But big clouds remain. While Mr. Ma, who has largely stayed outside China since Beijing began cracking down on his companies, appeared in public in Hangzhou the day before Alibaba announced its plans, the strictly controlled event suggests he won’t do anything to irritate officials.
And the disappearance of another Chinese tech titan, the deal maker Bao Fan, is a reminder that Beijing’s close scrutiny of private enterprise is far from over.
THE SPEED READ
A group led by Josh Harris, a co-founder of Apollo Global Management, has reportedly bid for the Washington Commanders. (Bloomberg)
Offers for the English soccer club Manchester United are reportedly lower than the Glazer family’s valuation. (ESPN)
Shares in the movie theater chain AMC jumped after reports that Amazon was looking to buy it. (Reuters)
“The Blast Effect: This Is How Bullets From an AR-15 Blow the Body Apart.” (WaPo)
Taiwan’s president, Tsai Ing-wen, is traveling to the U.S., where she is expected to meet officials including Speaker Kevin McCarthy. (NYT)
The Labor Department said Dollar General was a “severe violator,” repeatedly or willfully breaching worker safety standards. (NYT)
Best of the rest
Microsoft, Amazon and Google are among the big tech companies cutting A.I. ethics teams. (FT)
“Court Reinstates Adnan Syed’s Murder Conviction in ‘Serial’ Case and Orders New Hearing.” (NYT)
The drinks maker Diageo has appointed Debra Crew as C.E.O., its first woman in the role. (WSJ)
Influencers are planning for life after a potential TikTok ban. (Semafor)
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