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ZURICH (Reuters) - UBS signalled that it will cut its investment bank to a rump after a $37 billion (18 billion pound) bill from the subprime crisis, the biggest of any bank in the world.
The Swiss group's new chief executive told shareholders on Wednesday that the investment bank would no longer be able to use UBS's prized wealthy client base to refinance its business, effectively cutting its lifeline.
"The capital required by the investment bank for future growth must be generated under its own steam," Marcel Rohner told shareholders. "Surpluses from the wealth management business will be returned to shareholders."
Although it will keep a rump of the business to provide structured products to UBS's wealthy customers, the decision marks the departure of an investment banking titan from the global stage which had regularly topped league tables.
Investors in UBS (UBSN.VX: Quote, Profile, Research) meet on Wednesday to consider a second emergency capital increase within months to stabilise the Swiss bank reeling from the subprime crisis and appoint a new chairman.
Marcel Ospel, who had ruled the bank with an iron hand, leaves UBS facing a bill of more than $37 billion from the crisis in loans given to risky U.S. home owners, the largest of any bank in the world.
UBS in a report this week blamed poor risk control and a narrow focus on revenue growth for its woes, saying it had let the rapid build-up of its investment bank run out of control.
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