UBS latest to receive Government financial assistance
Swiss banking giant, UBS, is the latest European bank to receive help from its Government, in a bid to reduce the risk to the bank’s balance sheet.
The Swiss bank is raising $5.3 billion (£3 billion) from the Government, who will take a 9.3% stake in the bank. Meanwhile, it will be able to transfer up to $60 billion of distressed assets to a fund supported by the Swiss National Bank (SNB).
Meanwhile, the Government is to moderately increase the guarantee on bank deposits, reflecting action taken by its fellow European nations.
The fund will be financed by $6 billion from UBS and a $54 billion loan from the central bank. The SNB will receive interest on the loans and is entitled to a share in any profits the fund makes.
According to the SNB, the measures will help to stabilise the financial system, but did say it was a ‘highly unusual‘ and ‘unprecedented‘ operation. However, the risk of losses was limited due to already significant write-downs on its risky positions.
UBS, which is among one of the worst hit victims of the sub-prime crisis, has thanked the Government and SNB for the financial help and said it wants to ensure that everything possible is done to protect the solidity of the bank.
In related news, fellow bank, Credit Suisse declined an offer of Government assistance after it was able to raise SwFr10 billion from investors worldwide, including the Qatar Investment Authority.