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With all that's happened in finance, it's refreshing when the chief executive of a large institution accepts personal responsibility for a multibillion-dollar loss and resigns. But while Ossie Gruebel's departure from UBS AG may preserve his reputation, it leaves the Swiss bank adrift.

Mr. Gruebel's resignation puts a sudden stop to an otherwise admirable four-decade career. After stepping down from Credit Suisse at a high point in early 2007, he came out of retirement, partly from a sense of national duty, to lead the turnaround of UBS. The future of the country's banking icon had been jeopardized by more than $50-billion (U.S.) of losses on toxic securities and an investigation by U.S. authorities over tax evasion.

Mr. Gruebel's intention had been to hand off a bank that had regained the trust of the local citizenry and clients worldwide to a new leader about 18 months from now. But the $2.3-billion rogue trading loss undermined claims that risk management was under control.

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Sergio Ermotti, who has been installed as Gruebel's interim replacement, becomes the bank's fourth chief executive in as many years. The former UniCredit executive at least has the advantage of being a Swiss national, an important factor given the domestic dismay over the bank's repeated failures.

But Mr. Ermotti only arrived at UBS in April. And his ability to assert authority will be limited by the board's search for a permanent CEO. Even if Mr. Ermotti is confirmed in the role – and it's hard to see many other qualified candidates wanting to run a bank where the rot clearly runs deep – this will take time. Besides, the sheer scope and scale of UBS's recent crises suggest it will require more than another leadership change to reverse its fortunes.

However cloudy the future for UBS, one thing is clear: the investment bank faces savage cuts. Given the need to protect the group's flagship private banking franchise, UBS has little choice at this point but to shrink the institutional advisory and trading arm enough to still serve, but not threaten, the wealth of its clients.

It won't be an easy sell. No investment banker wants to work at an institution determined to get smaller. The best hope for UBS now is that it is getting a head start on what will become an unavoidable industry trend.

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