It was not a total surprise when the news broke at the weekend that UBS chief executive Oswald Grübel had resigned. The 67-year-old, a former Credit Suisse veteran, who had come out of retirement to help deal with UBS’s woes around three years ago, felt he had no alternative but to take ultimate responsibility for the $2.3 billion trading loss caused by a rogue trader. (To view the story, click here).

UBS shares were up around 4.25 per cent on Monday morning, at around SFr10.55 per share. The price has declined since late April, from around SFr17, along with those of many other major banks. 

As became clear in a conference call with Kaspar Villiger, the UBS chairman, and the interim CEO, Sergio Ermotti, 51, the UBS board was reluctant to see GrĂĽbel go and the bank would have preferred more time for the man to stay in the post until a full-time replacement was found.

However, given his age and time in the hard slog of modern banking, it was inevitable that GrĂĽbel would have wanted to step down and depart with dignity, rather than hang on and have to put up with inevitable, endless speculation about his successor. In an age when politicians, for example, routinely cling on to jobs when something has gone wrong, it is refreshing that a man takes responsibility even though he could fairly argue that such sagas can occur even in the best-run of banks. I have seen headlines saying that his departure left UBS "in the lurch". I don't agree. At his age, his departure was a matter of when, not if.

There are, admittedly, some analysts who are concerned. Chris Wheeler, of Mediobanca, the Italian firm, said in a note that the bank is cutting its stock recommendation on UBS to "underperform" from "outperform". Mediobanca says the timing of the CEO's resignation "could not have been worse," saying that "we now have the fourth [UBS] CEO since July 2007. With a new CFO just settling in, the bank appears to be in disarray at a crucial time in its history." But as Mediobanca must acknowledge, GrĂĽbel would have probably stood down fairly soon in any event. Would waiting another year, say, make a huge difference?

So what about his successor? Ermotti, who joined UBS in April from UniCredit, where he had missed out on getting the top job there, has - according to reports - been tipped as a candidate for further promotion since he joined the Swiss banking group as head of Europe, Middle East and Africa. He has been head of global equities at Merrill Lynch and has experience in investment banking and wealth management. He is going to need all that experience and more. He has not been given the CEO spot as a permanent role, at least not yet. So there is bound to be speculation on who that might be, which needs to be ended soon.

What next?

There are several conclusions that can be drawn from the trading loss so far – although I will not touch on some of the specifics as the issue is now under investigation.

First of all, I haven’t yet heard of any kind of mass exodus of UBS wealth management clients. UBS has had to contend with a number of serious problems over the past three years: heavy sub-prime mortgage-related losses and the 2009 tax wrangle with the US. Clients who had been alarmed by such things will have already gone, analysts say. Those who have stayed at the bank, or been signed up, are probably sufficiently hardened to such incidents by now and will stay on board. It is, however, essential that UBS's relationship managers engage closely with clients to explain what has happened.

In the Americas, the firm has repeatedly confirmed that its wealth management business is a priority, and that continuing to attract and retain client-facing staff is on the agenda amid job cuts elsewhere. While there has been ongoing industry speculation about a sale of the unit, the bank reportedly says it will not sell any wealth management businesses – and the paring down of the investment bank seems to back this up. Furthermore, the WMA business was profitable in the second quarter and attracted net new money of SFr2.6 billion (around $2.9 billion).

“We've come too far - with even more potential - to let this setback distract us from our goals and objectives,” Wealth Management Americas Robert McCann said in a memo sent earlier this week to employees and obtained by On Wall Street.

Also, UBS has insisted several times that no client positions have been affected by the unauthorized trading loss. Given that, it does seem as though the investment bank’s problems have been successfully sealed off from the wealth management side of the bank, even though there is, inevitably, some reputational hit.

An old debate has revived on whether it makes sense for a wealth management operation to be working closely with an investment bank. The claim has been made that "pure-play" wealth management works best. (But what do such organizations say if they encounter trouble?) Other big-name firms such as Credit Suisse, Citigroup and HSBC have private banks operating under a broad umbrella organization. In the case of Credit Suisse, for example, its private bank likes to stress its “one-bank” advantages. If UBS can prove to clients that having an investment bank – despite some problems – is worth it in terms of delivering what clients want, then its integrated model could still make sense.

Of course, with integrated banks, rising capital standards – which are even tougher in Switzerland than elsewhere – are forcing banks to reduce risk exposures. Even before the trading losses were found out at UBS, the investment bank was under increasingly tight constraints. But there is no doubt that the scaling back of the investment bank, or at least its riskier aspects, will now accelerate. We are told that there will be more information on this in November. More job cuts could be on the way.

About a year ago, UBS signaled it had fought its way back from a series of damaging problems by such developments as its sponsorship of the Formula One Grand Prix in Singapore. UBS executives no doubt hoped last weekend to enjoy exciting motor racing and conversation with colleagues and clients in the Asian city-state. Instead, they had to deal with the aftermath of a rogue trader’s exploits. But by quickly resigning and allowing the bank to move on, Oswald GrĂĽbel has given UBS a chance to recover so long as the new corporate leadership is rapidly confirmed. It is now up to the new leadership of that bank to ensure it does not suffer further mishaps.