UBS has wasted little time appointing Sergio Ermotti as its permanent chief executive – a job he has held on an interim basis since the departure of Oswald Grübel in the wake of a Sfr2bn ($2.2bn) rogue trading loss. The Swiss bank's rush to clarify its leadership – it also announced chairman Kaspar Villiger will make way early next year for ex-Bundesbank chief Axel Weber – is understandable given the challenges that UBS faces.

Ermotti's problem is that UBS has core Tier 1 capital of 33.1 billion francs and risk-weighted assets on a Basel III basis of 360 billion francs, implying a core Tier 1 ratio of 9.2%, according to Morgan Stanley estimates. The market believes UBS needs to hit the Swiss target of a Basel III core Tier 1 ratio of at least 13% by 2013. Assuming the bank generates seven billion francs of capital from retained earnings, it will have 40 billion francs of capital by 2013, enough to support only around 300 billion francs of risk-weighted assets.