Sergio Ermotti, chief executive officer of UBS AG (NYSE:UBS), the largest bank of Switzerland announced his plan to cut nearly 10,000 jobs after the bank reported $2.31 billion losses during the third quarter.

UBS

The bank’s workforce reduction is part of the bank’s strategy to boost its profitability by at least 15 percent, starting 2015, to reduce its expenditures and save approximately $3.6 billion (3.4 billion Swiss Francs).

The Swiss bank’s employee head count will shrink from 64,000 to 54,000 by 2015. According to UBS, a majority of the job cuts, approximately 7,500 will be in the United States and London, while the remaining 2,500 will be in Switzerland.

Ermotti also announced the reorganization of the UBS Investment Bank. He appointed Andrea Orcel to lead UBS Investment Bank, while Carsten Kengeter, who serves as the current co-chief of the Investment Bank, will vacate his position in the bank’s executive board. He will be in-charge in winding down the non-core assets of UBS.

According to Ermotti, Kengeter’s new role in the company is very important, and he will take a number of employees from the Investment Bank to help him carry out his new responsibilities. UBS aims to reduce its investment bank and fixed-income unit’s risk-weighted assets by approximately 100 billion and 80 billion Swiss Francs respectively, by the end of 2017.

UBS said it will maintain the investment bank’s advisory, equities, foreign exchange, and metals businesses, as well as credit and rate facilitation capabilities. The investment bank’s equity allocation will decline from 65 percent to 35 percent.

Ermotti estimated that the number of job cuts in the investment bank will be around 5,000.

In a memo to UBS AG (NYSE:UBS) employees, Ermotti wrote, “Change is necessary for the entire banking industry.  By acting now, we are getting ahead of our competitors and reshaping our business so that it can deliver sustainable results over the long term.”

UBS expects to incur expenses of around 3.3 billion Swiss Francs related to its reorganization efforts within the next three years. The bank estimates to report 500 million Swiss Francs in charges in the fourth quarter, which might result in a net loss. The Swiss bank expects to posts an average of mid-single digits returns on equity over the next two years.

Ermotti expressed confidence that UBS will “continue to be a significant global player in its core businesses.” Since taking over as CEO of UBS AG (NYSE:UBS), Ermotti decided to downsize the group’s investment bank to meet capital requirements. The profitability of the bank declined due to the ongoing European debt crisis. In addition, UBS is facing different legal challenges particularly the LIBOR scandal.