Among the causes of UBS’ subprime losses and legal tussles with the US government over its offshore banking activities were an absence of balance sheet limits and an overall assessment of risk positions, an insufficient compliance culture and a false sense of security despite warning signs, according to a report released today by the Swiss bank.

Meanwhile, UBS has defended its earlier decision not to take legal action against former leaders over the failures, saying it did not make sense from a cost/benefit perspective and would have further damaged the company and its shareholders. Despite the fact the decision to refrain from liability litigation was harshly criticised by some shareholders and the general public, it was "appropriate" and "required", according to an independent statement of opinion on the report by Professor Peter Forstmoser, an attorney-at-law.

Transparency report to the shareholders of UBS is a review of “the crisis faced by UBS in the past years”, according to the bank’s website, and was written to fulfil recommendation 19 in the report published by the control committee of the Swiss parliament at the end of May 2010.

The findings tie in with a study by Dr Tobias Straumann, a lecturer at the University of Zurich, prepared for delivery to UBS. Dr Straumann finds there is no evidence the bank's management acted like “gamblers”, but finds they were too complacent, “wrongly believing everything was under control”, and the firm lacked “healthy mistrust, independent judgement and strength of leadership”.

While admitting there were also mistakes on the part of the Financial Market Supervisory Authority and by the Control Committees of the Federal Assembly, Dr Straumann’s study emphasises the wide-ranging consequences of UBS’ failures.

“Without the huge write-downs in the subprime market and the violations of US law in the cross-border business, the train that ultimately led to a controversial use of public funds and to a substantial weakening of the Swiss bank customer secrecy would never have left the station,” he writes.

In terms of its current position, the bank says it has taken a number of steps to rectify the problems highlighted in the report. These include exiting the US cross-border market, ensuring the independence of legal and compliance functions, and addressing issues such as risk management and remuneration structures.

“What happened should not have happened. The present report sheds light on the inappropriate behaviour and failings that made it possible… All those who stood at the helm of UBS at the time in question must face up to the moral responsibility they bear, even if the questions of criminal or civil liability remain unresolved. Many of those who led UBS at the time have already acknowledged this responsibility toward the company, either by waiving certain compensation claims or by repaying amounts received,” said Kaspar Villiger, chairman of the board of directors at UBS, in a foreword to the report.