UBS ex-CEO leads campaign to shake up bank

By Thomas Atkins

ZURICH (Reuters) - Pressure on beleaguered Swiss bank UBS AG (UBSN.VX: Quote, Profile, Research) to break up intensified as activist investor and former chief executive Luqman Arnold demanded to shake up its governance and structure.

Arnold seeks to oust the newly named chairman, sell off asset management and the Brazilian division Pactual, and place the rest into a holding company with a view to selling investment banking and reducing the group to its wealth management rump.

"UBS's reputation has been comprehensively destroyed by proprietary trading activities totally divorced from any client business," Arnold said in a letter on Friday.

UBS shares rose 2.6 percent on the news as European banks were overall slightly weaker (.SX7P>.

Arnold's investment group, Olivant, said it controlled over 0.7 percent of UBS's capital. That would make him one of the top 10 investors in the world's largest wealth manager, the bank hardest-hit worldwide from the subprime crisis.

UBS has rejected calls for sweeping changes, saying its dual focus on investment banking and wealth management is sound.

The bank has already swept out management and seeks to raise a total of 34 billion Swiss francs ($33.5 billion) in capital, after writing down around $37 billion in bad investments made in a breakneck expansion in investment banking.

But in a letter sent to supervisory board member Sergio Marchionne -- currently chief executive of automaker Fiat SpA (FIA.MI: Quote, Profile, Research) -- Arnold said the measures fall short. (http://www.olivant.com/press-releases/).