I’ve blogged about this before: UBS may be the next Humpty Dumpty bank to take a fall. Why is this important to me? Well, I and many others hold UBS in high regard as the paragon of Swiss banking. Perhaps that’s not warranted, but if UBS weebles, wobbles and then topples, that should give us an idea of just how bad capitalism’s malignant cancer has become.
Many news sources are commenting on UBS’s transfer of toxic assets to the Swiss Government, but Forbes puts it this way:
UBS’s plan to transfer up to $60.0 billion of illiquid, mortgage-backed securities received a cautious welcome from analysts on Thursday. The move should help the bank regain the confidence of its clients and limit new money outflows, said Guido Hoymann of Bankhaus Metzler Seel in Zurich. “Of course it’s impossible to say that UBS is in the clear now, and there may be other classes of assets that turn out to be sour.”
According to AP, the Swiss Goverrnment has injected $6bn directly into the bank, and has made loans of up to $54 bn available.
The fresh capital, equivalent to 3.9 billion euros or 5.2 billion dollars, would give the Swiss government a 9.3-percent stake in the bank, one of the worst-hit by the global financial crisis.
Eugen Haltiner, president of Federal Banking Commission, told journalists that the step was necessary because “trust in UBS has seriously suffered” owing to the subprime crisis and general financial turmoil.
In an indication of how much of a pounding the bank’s once-solid reputation has taken, customers withdrew nearly 84 billion Swiss francs worth of assets from UBS during the third quarter, it said in a statement.
UBS’s wealth management and business banking division saw clients withdraw a net 49.3 billion Swiss francs, “with a significant part of the outflow taking place in the last few weeks of the quarter,” it said.
The market has not reacted positively to the news, with UBS shares falling from the $18 range to $17 in the first two hours of trading. It’s not much to be worried about.
I’m not pushing the panic button yet. Still hanging in there.
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