UBS chief executive Oswald Grübel has resigned, to be replaced by senior UBS executive Sergio Ermotti on an interim basis, the Swiss wealth management and banking giant said as it sought to recover from a $2.3 billion loss caused by a rogue trader.

The bank also said in future its investment bank will be “less complex”, carry less risk and use less capital to support its operations. Further details on the investment banking operation will be issued in November.

Ermotti takes up the post with immediate effect. He joined the Zurich listed bank in 2010 as chairman and CEO of Europe, Middle East and Africa and member of the Group Executive Board. He had previously been deputy group CEO at Italy’s UniCredit.

"The Board regrets Oswald Grübel's decision. Oswald Grübel feels that it is his duty to assume responsibility for the recent unauthorized trading incident. It is testimony to his uncompromising principles and integrity. During his tenure, he achieved an impressive turnaround and strengthened UBS fundamentally. He steps down having helped make UBS one of the world’s best capitalized banks,” Kaspar Villiger, chairman of UBS, said in a statement.

“On behalf of the board of directors, I extend my heartfelt gratitude to him for everything he has done for UBS," Villiger continued.

UBS will continue an internal and external search for a full-time CEO, the statement continued.

UK and Swiss regulators are investigating circumstances of the UBS trading loss, which has led to the arrest of Kweku Adoboli, 31. The man has been charged with offences connected with the huge losses.

In a conference call with journalists, Villiger said UBS was committed to retaining strong links between the investment bank – where the trading loss occurred – and the wealth management side of the business. The affair has reignited debate on whether it is in the interests of clients to have such a connection.

After a review in July, the bank concluded that clients are best served by such a connection, Villiger said. “We came to the conclusion that the integrated model, if done the right way, is the best model in the eyes of our shareholders.”

Ermotti added: “In the last two years the bank has made much progress in reducing market risk and trade risk. We cannot accept this kind of event in undermining a lot of work and in damaging our wealth management franchise,” he said. “We need to focus more on operational risk and make sure that all the work done is not thrown away.”

Out of retirement

The resignation of 67-year-old Grübel comes about two years after he came out of retirement to head up UBS to help revive the fortunes of the bank. UBS had suffered massive losses relating to the 2008 credit crunch; in 2009, it also suffered a damaging legal fight with the US over the country’s demand to get access to secret Swiss bank accounts in a hunt for tax evaders. Under a deal between the Swiss and US authorities, UBS handed over 4,450 client account details to the US. More recently, the flagship wealth management arm of UBS has seen its fortunes revive, returning to profit in all regions.

Today’s announcement happened at what had been expected to be an enjoyable weekend for UBS executives gathering in Singapore to see the Formula One Grand Prix motor race, which UBS sponsors.

The affair has revived question marks over whether it makes financial sense for a wealth management business to have close links to an investment bank. Analysts have told this publication that they do not expect the trading loss saga to drive out many, or any, wealth management clients.

UBS reiterated that it was committed to its “integrated strategy” with its wealth management, investment bank, asset management and Swiss retail and corporate businesses as “essential”.

“Board of directors has asked the group executive board to accelerate the implementation of the investment bank's client-centric strategy, concentrating on advisory, capital markets, and client flow and solutions businesses,” UBS said.

“This strategy is consistent with the industry's changing capital requirements and will lead to a reduction in complexity. It will also help to ensure that UBS delivers the best-quality risk-adjusted returns for shareholders,” it said.

“We are committed to further expanding our already leading global wealth management franchise. The Investment Bank will continue to strengthen its alignment with UBS's wealth management businesses, in addition to serving its corporate, sovereign and other institutional clients,” said Villiger in the same statement.

“In the future, the investment bank will be less complex, carry less risk and use less capital to produce reliable returns and contribute more optimally to UBS’s overall objectives,” it said.

In the conference call, Villiger rejected the suggestion that the head of the investment bank, Carsten Kengeter, should not stay in his role. “He has done an excellent job in handling this crisis,” Villiger said.