Banking StandardsLetter from Andrea Orcel, Andrew Williams and Philip Lofts, UBS

Thank you for the opportunity to appear before you last month. There were a number of matters on which members of the Commission asked us to provide further information. Our responses are set out below:

1.Attached as Appendix 1 is a list of personnel whose employment was terminated1—in all but one case by agreement—as a result of the investigation into LIBOR and EURIBOR. As you will see from Appendix 1, there were in fact 17 such employees, not 18 as we wrongly stated during the hearing. Swiss Federal criminal law prohibits us from disclosing the identity of those employees resident in Switzerland. However, we can assure you that FINMA, our primary regulator, is fully aware of all the relevant details and the FSA has copies of the agreements relating to the former UK employees.

2.In answer to the Commission’s question at Q1896, Mr. Orcel referred to informing counterparties in relation to individuals who had already left the bank and then been found to be “guilty”. We should clarify that this was a reference to notifications that are made to the relevant regulators, and which are therefore subject to the procedures of those regulators, particularly in relation to their on-going investigations. Mr. Williams explained the FSA’s procedures in the next answer to Lord Lawson (Q1897).

3.Lord McFall asked if we would consider establishing a culture and ethics hotline with independent scrutiny. Although ethical matters are already covered under our whistleblowing policy, a copy of which we enclose for your reference, we will undertake a major relaunch of the policy by our Chairman and Chief Executive to publicise this further to encourage employees to report such matters.

4.Attached as Appendix 2 is a summary of matters raised in our quarterly whistleblowing report since our new policy was introduced in 2010.

5.We have not been able to ascertain when or by whom a decision was taken that the LIBOR submitters would also be traders. However, we can say that UBS has been a member of LIBOR panels since the BBA started calculating LIBOR in its current form in 1986.

6.As to Mr. Hayes, he joined the bank in June 2006 from Royal Bank of Canada in London. He left to join Citi in Japan in autumn 2009. His salary and bonuses received from UBS are set out in Appendix 3.2

7.As requested, a copy of our standard reference for both the UK and Japan is attached in Appendix 4. Citi did not request a reference for Mr. Hayes and one was not given.

8.Members of the Commission asked what proportion of the profit that Mr. Hayes made for UBS during his period of employment is attributable to his manipulative conduct. UBS has been exploring this extremely complex question, but has not been able to produce an answer to date.

9.In 2011, which is the most recent year for which we have information available, UBS hired a total of 478 permanent employees who work in a revenue generating area (excluding support staff), of which 153 are graduate trainees.

With regard to the integration of our new joiners into the culture of UBS, in the UK we operate an “on-boarding” programme for all new hires. On their first day this provides an opportunity for them to get an overview of working at UBS, and also covers legal and compliance controls.

The programme continues with various mandatory courses and eLearning events covering subjects including Working with Respect (creating a fair and inclusive work environment) and Understanding UBS (on divisions, businesses and capabilities). New joiners are also provided with access to a portal with links to global, regional and division specific information. A quarterly new joiner learning event takes place with a senior speaker covering business relevant updates, leadership skills and career development.

Line managers also provide support, outlining key activities for new joiners as well as being encouraged to discuss the vision and culture of the firm.

In terms of managing an employee’s performance and behaviour, objective setting is conducted within the first few weeks of employment to ensure employees gain an understanding of the performance expectations. Performance feedback occurs at key points during the year.

The formal appraisal process occurs at the end of the performance year, and both employee and manager evaluate the year’s performance against the employee’s objectives and his/her expected capabilities for his/her rank. All employees are evaluated by their line manager and 360 feedback is also available from peers, internal clients, direct reports, and others. A conversation between the line manager and the employee is a core element of the appraisal process and is used for evaluating an employee’s performance and contribution to the bank: it links the strategies and objectives of the bank to the individual goals and aspirations of its employees. This year our appraisal process has been enhanced to emphasise the importance of compliance and remediation activities. A failure by an employee in either of these areas will both negatively affect their compensation and disqualify the employee from promotion.

Once again we thank you for the opportunity to appear before you. Please let us know if we can assist the Commission further.

 

(S146) Appendix 4

UK:
To Whom It may Concern:

We confirm the following information with regard to the above named.

Mr xxxx was employed by UBS London between xxxx and xxx. Mr xxx last position with UBS London was as a xxx within our xxxx function.

Subject to compliance with any legal and/or regulatory requirements, it is not the policy of UBS to provide any further information for references. This does not imply any comment, positive or negative about the individual or the course of their employment with UBS.

Any use of the term Director is purely to reflect titular status. This does not imply any shareholding or legal interest in UBS on behalf of the above named employee.

In accordance with this policy, this information is given in the strictest of confidence and without financial or other liabilities on behalf of UBS or any of its officers.

UBS AG will not respond directly to any verification queries; verification can only be made as detailed below.

Yours faithfully
For and on behalf of UBS AG

Japan:
To Whom It May Concern

Re : XXXX

This is to certify that Mr XXXX was employed by UBS Securities Japan Co., Ltd. (the “Firm”) between XXXX and XXXX. His last position with the Firm was XXXX within XXXX Division, and he held the corporate title of XXXX.

It is not the policy of the Firm to provide any further information for references. This does not imply any comment, positive or negative about the employee or the course of his employment with the Firm.

In accordance with this policy, this information is given in the strictest of confidence and without financial or other liabilities on behalf of the Firm or any of its officers.

20 February 2013