Hedge fund collapse claims UBS head as biggest victim

Long Term Capital Management (LTCM), the hedge fund saved from near collapse two weeks ago, claimed its biggest victim to date yesterday, when Mathis Cabiallavetta, the chairman of UBS, Europe's largest bank, was forced to resign.

Earlier revelations that UBS had written off 950 million Swiss francs (about HK$5.39 billion) because of its exposure to the bank, sparked an internal audit, which the bank said revealed 'shortcomings' in the group's risk management procedures.

The bank said it found no evidence of gross negligence but said Mr Cabiallavetta had decided to resign of his own accord, 'as a step towards rebuilding confidence'.

UBS has said its exposure to LTCM and volatility in global markets meant it now expected a third-quarter after-tax loss of up to one billion francs.

The bank said its chief risk officer Felix Fischer would also leave, as well as Werner Bonadurer, the co-chief of the bank's investment banking arm Warburg Dillon Read, and the head of interest rates at WDR, Andrew Siciliano.

In a toughly worded statement handed down by the UBS board to the executive board, the bank was told to 'learn the necessary lessons from what has happened in terms of business orientation and business management', and ensure that such deals would never occur again.

'The internal audit into UBS' investment in LTCM has uncovered shortcomings in risk management procedures both before, during and after the UBS merger. At the same time however no signs were found of gross negligence on the part of the persons involved,' it said.