ZURICH (Reuters) - The Swiss government is set to appoint British-born former banker Mark Branson as the first non-Swiss national to head its financial regulator, two sources said, just as the body probes currency markets and prepares for a major review of big banks.
The appointment was scheduled for debate in the Swiss government’s weekly meeting on Wednesday, the sources, who are familiar with the matter, told Reuters.
A Swiss Financial Market Supervisory Authority (FINMA) spokesman was not immediately available for comment on Tuesday.
FINMA has already proposed Branson, who has worked at the regulator since 2010 and became deputy chief executive last year. Government approval is normally a formality in such situations.
There has been debate among Swiss lawmakers about the appointment, however, focusing on his stewardship of a division of Swiss bank UBS UBSN.VX that was involved in criminal efforts to rig interest rates.
Branson was in charge of the UBS Japan unit between 2006 and early 2008 when it was secretly rigging the London Interbank Offered Rate (Libor), a leading benchmark used to price trillions of dollars of financial products.
FINMA gave Branson, who was recused by the regulator from all UBS Libor matters in mid-2012, the all-clear over the fraud, which was described by U.S. authorities as being on an “epic” scale.
Libor traders at UBS answered to investment banking leadership in London, according to FINMA, and not to Branson, who was never accused of any wrongdoing. Branson himself has not commented.
In December 2012, UBS agreed to pay roughly $1.5 billion to settle with U.S., U.K. and Swiss regulators over the Libor scandal. UBS’s Japan unit pleaded guilty to criminal fraud.
FINMA criticised management at UBS for failing to adequately supervise its staff.
Former and current colleagues dismiss the view that Branson’s past will impede his future as head of FINMA.
“Mark Branson has a proven integrity, and a professional objectivity, in the sense of distance. He can be very close to someone but it doesn’t compromise his objectivity, and he does it elegantly,” Luqman Arnold, a former CEO of UBS.
But criticism may resurface when Branson has to deal with future misconduct cases.
“There cannot be anything which questions the credibility of FINMA in any way. Branson’s UBS past is a problem,” Christophe Darbellay, president of Switzerland’s Christian Democratic People’s Party, said before Tuesday’s news.
FINMA, along with regulators in the United States, Britain and Asia, is currently probing possible manipulation of the $5.3 trillion-a-day foreign exchange market and Britain’s financial watchdog has said the allegations concerning currency are as serious as those concerning Libor.
Branson joined FINMA in 2010 to oversee Switzerland’s banking sector and was named deputy chief executive last year.
He has been acting CEO since January when Patrick Raaflaub announced his surprise departure.
Branson’s promotion to the top job marks a continuation of Switzerland’s tougher, hands-on approach to banking regulation forged in the aftermath of the 2008-09 financial crisis.
At the time, taxpayers had to prop up UBS, once the pride of the country, with a 6 billion Swiss franc bailout after the bank’s disastrous bets on the U.S. mortgage market.
Chastened by that experience - FINMA had initially dismissed UBS’s mortgage losses as a mere “fender bender ” - Swiss authorities have since imposed some of the toughest capital requirements in the world on UBS and Credit Suisse CSGN.VX.
Branson, a maths and management graduate from Cambridge University, defused any suggestion of favouritism towards UBS last year when he blindsided his old employer with an order to stockpile 28 billion Swiss francs ($32 billion)in extra capital.
That sum was later lowered to 22.5 billion but still hit the bank’s returns targets.
FINMA and the Swiss National Bank (SNB) begin conducting a review of laws on banks regarded as being “too big to fail” next year.
This is being closely watched by investors because of political calls in Switzerland for a tougher line on institutions that think their scale allows them to expect state bailouts.
An extensive U.S. probe into Swiss banks’ role in helping wealthy U.S. citizens evade tax has also fundamentally altered the relationship between the regulator and the banks.
Bankers in Zurich, Geneva and Basel have complained that the regulator had “gone rogue” on them after it urged Swiss banks late last year to come clean about their role in offshore tax evasion and to take provisions for resultant penalties, or risk more costly prosecution by U.S. authorities.
Branson, 45, is versed in dealing with crises. In 2001, as head of communications for UBS, he orchestrated its defence of its role in the bankruptcy of national carrier Swissair, which sparked widespread political and popular outrage.
In 2008, he became the public face of UBS in the United States, apologising to angry lawmakers in a dramatic hearing on Capitol Hill for the Swiss bank’s role in helping Americans evade taxes.
People who have worked with Branson, who is fluent in French and German, say he is principled and a stickler for details.
While at UBS, he insisted on proofing statements meant for investors word-for-word, marking each line with a tick.
While the appointment of Branson marks a continuation of his predecessor’s tougher line on regulation, insiders say he has a “lighter touch” than Raaflaub, who once infuriated bankers by saying it wasn’t FINMA’s job to promote the competitiveness of Swiss banks. ($1 = 0.8862 Swiss Francs)
Additional reporting by Oliver Hirt; Editing by Carmel Crimmins and Anthony Barker