The chief executive of Zurich Cantonal Bank (ZKB), Hans Vögeli, is to step down early after an outcry over the regional bank's sale of options to foreign investors.This content was published on May 7, 2007 - 14:45
ZKB had come under fire following complaints by one of its clients, the Sulzer engineering group, that rivals secretly built up a stake in the company using options sold by the bank.
Switzerland's third-largest bank said on Monday that Martin Scholl would take over on June 1 from Vögeli, who was due to retire at the end of the year. Trading chief Markus Hofmann will also depart "with immediate effect", the bank added.
"Vögeli takes formal responsibility for mistakes that have been made at various levels in trading deals with shares in the Sulzer group," the bank said in a statement, adding that there had been a "breach of internal rules".
Members of Zurich regional parliament welcomed the news of Vögeli's early departure as well as demanding further protective measures and explanations for the trading scandal.
ZKB has drawn heavy criticism for helping two investor groups use options to build a 32 per cent stake in Sulzer. ZKB's investment banking chief, Hans Fischer, last month retired after "differences of opinion" about trading strategies as the scandal heated up.
The bank said it would be reviewing its trading policies, saying last week it would halt the sale of options in hostile takeovers, but it denies any illegal activity.
Sulzer, itself a ZKB client, has criticised the bank for the way the Russian investor group Renova – controlled by billionaire Victor Vekselberg – and Austria's Victory investment group amassed a controlling stake in the Swiss company behind the scenes.
The Sulzer case is at least the fifth in Switzerland since 2005 where raiders have used cash options to seize large stakes in companies without having to disclose their positions; the Swiss government has vowed to review the law in this regard.
The Swiss Federal Banking Commission has also opened an investigation into events surrounding Sulzer.
On April 30 lawmakers in the capital Bern backed a proposal to reduce the reporting threshold for investors, which is currently set at five per cent of a company's stock or five per cent of options. That enables them to buy up to ten per cent undetected.
The revised law, which requires the approval of a Senate committee, would lower the limit on both stock and options to three per cent, as in other countries.
swissinfo with agencies
Under Swiss regulations, any party buying 5% or more of a company's shares must report their stake. The same rule applies when 5% of options have been accumulated. Every 5% increment after this must also be declared.
This rule does not apply to cash-settlement-options contracts that allow the holder to exchange for either cash or shares if desired.
Parliament is currently looking into measures to close this loophole and hopes to tighten the rules by July of this year.
Sulzer is the latest in a line of Swiss companies to come under ambush by hostile bidders.
Two years ago Victory took over Unaxis (later renamed OC Oerlikon) after building up a secret stake (Renova also now holds a stake).
The Austrian private equity group then repeated the trick with machinery manufacturers Saurer. Victory has also been progressively buying a stake in telecommunications company Ascom.
Swiss construction group Implenia asked the authorities last month to look into the secret acquisition of over a fifth of its shares by British hedge fund Laxey Partners.
The hostile takeover bid by Swiss reinsurer Converium by its French counterpart Scor this year is also being investigated after shareholder Martin Ebner sold his 20% stake to Scor.
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