UBS CEO Responds to Losses in FX Derivatives: Not a Governance Issue

According to an interview with Sergio Ermotti, CEO of UBS, this event does not expose deeper-seated issues within the Swiss bank. On Wednesday, Ermotti explained that the losses were "an unfortunate result" caused by clients who failed to correctly use the derivatives products.

The incident has had an impact on UBS' reputation in its home market of Switzerland. According to lawyers representing affected clients, some investors lost amounts exceeding their initial investment when unexpected fluctuations occurred in currency-linked derivatives.

UBS is currently investigating six client managers involved in this event, with some having already left the company. Ermotti confirmed on Wednesday's TV interview that UBS has made compensation payments to certain clients.

He emphasized that "this only affects a specific region of less than 200 clients and a few advisors." He also noted that over 3,000 clients use these products within strict asset allocation and risk tolerance frameworks.

The Swiss Association for Self-Administered Institutions (SASV) stated that the affected range-targeted forward contracts (RTPF) are complex FX derivatives that even experienced investors may find difficult to understand. They explained that when exchange rates remain within a predetermined range, investors can receive periodic returns; however, if they break through this range, they face significant loss risks.

UBS Chief Financial Officer Todd Tuckner explained on Wednesday's analyst call that some Swiss clients "held products outside of standard asset allocation frameworks or their individual risk tolerance," resulting in losses mainly due to market volatility triggered by the US tariffs policy in April. He noted that the financial impact from reaching agreements with affected clients is already reflected in the second-quarter performance, but did not disclose specific amounts.