Coming out of the woodwork wielding a deadly combination of capital and his poison pen is former UBS president Luqman Arnold, whose investment firm Olivant Advisers owns a 0.7% stake in the bank, on the hook for $38 billion of writedowns. Due to his insider status, it’s believed Arnold might be given a degree of street credit in the letter he’s written to a UBS board member (just released) demanding a breakup of the bank and a hearing in advance its annual meeting April 23. That said, this guy didn’t exactly leave UBS under the best of circumstances, something not well-highlighted by the press today – other than in the following story.

UBS, the embattled Swiss bank that has been Europe’s main casualty of the credit crunch, is facing a fresh assault after a former chief executive launched an activist campaign to break it up and overhaul its board.

Luqman Arnold, who was forced out of UBS in 2001 and led a failed bid for Northern Rock, the mortgage lender, revealed he had built up a 0.7 per cent stake in the bank, valued at $450m (£226m), through Olivant, his investment company based in London.

He is pressing for a shake-up of the bank’s corporate governance, the sale of its asset management division and other units, and the ultimate separation of its investment and private banking arms.

Shares in UBS were 2.5 per cent higher at SFr33.22 in early Zurich trading on Friday.

Mr Arnold’s intervention comes after UBS this week claimed it had begun a “new chapter” in its history when it unveiled a further $19bn of losses on securities linked to the US subprime mortgage crisis, and proposed an emergency rights issue to raise SFr15bn (£7.5bn). It suffered about $18bn in writedowns last year.

As a result of the losses, Marcel Ospel, UBS’s long-serving chairman and the architect of its strategy, announced he was stepping down to be replaced by Peter Kurer, an experienced lawyer who was previously UBS’s general counsel.

Mr Arnold’s proposals, outlined in a six-page letter sent to Sergio Marchionne, UBS vice-chairman, include a sweeping overhaul of its board of directors to dismantle the powerful chairman’s office put in place by Mr Ospel.

Mr Arnold questions the appointment of Mr Kurer – whom he said he helped recruit to UBS – arguing it “does not bode well” for any reform of the bank’s corporate governance and should be scrapped in favour of a search for an “outstanding Swiss banker” from outside the organisation.

He advocates boosting UBS’s capital base by selling the bank’s asset management division and its Brazilian subsidiary and Australasian subsidiaries – moves he believes would raise $15bn.

Mr Arnold also questions UBS’s strategy of combining investment and private banking and calls for formal separation of the two businesses to allow a future break-up of the business.

Mr Arnold said he had no intention of putting himself forward for the chairmanship or any executive role.

“We are taking a medium-term view. It may take three weeks, three months, or longer,” he said. “We want to make money, it’s as simple as that.”

Continue reading at FT.com

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