SWISS BANK THAT ADVISED ON TAXPAYER BAIL OUT ACCEPTS TAXPAYER BAIL OUT
Did these banks know what they were doing, and knew they would have to be bailed out with such large sums of taxpayers money? If so, "bring forth the guillotine" (released by Silver Bullet 1989).
Switzerland unveils bank bail-out plan
• UBS hit by 'massive' outflows of clients' money
• Analysts said today's moves made the Swiss banks the best capitalised in the world
* David Gow
* Thursday October 16 2008 17.15 BST
* Article history
The Swiss authorities today moved belatedly to shore up their two biggest banks, taking a near-10% stake in UBS and forcing it and Credit Suisse to increase their capital base.
The government and central bank denied UBS had stood on the brink of catastrophe but Europe's biggest casualty of the sub-prime crisis admitted it had seen a "massive" withdrawal of funds from its wealthy customers and had been drawing on its cash reserves.
UBS, which had written down some $44bn (£25bn) of toxic assets and raised $27bn in fresh capital, saw almost $75bn of assets in wealth and asset management withdrawn in the third quarter.
The process accelerated last month after the US government allowed Lehman Brothers to go bust and investors, worried about the Swiss bank's damaged reputation, panicked.
The surprise Swiss move is the latest by the authorities in the west to bail out their banking sectors in the face of the unprecedented credit crunch but UBS insisted it was a "normal commercial operation " and it was now "clean".
In a deal coordinated by ministers, the Swiss National Bank and federal banking commission, the government effectively pumped $60bn into UBS, taking virtually the last $50bn of its toxic assets into a special purpose vehicle off its books and owned by the SNB.
The government is temporarily taking a 9.3% stake in UBS with a Sfr6bn (£3bn) capital injection. Credit Suisse, the country's second-biggest bank, turned down the offer of state aid but has raised Sfr10bn from sovereign wealth fund Qatar Investment Authority and a group of private investors, including Israeli firm Koor Industries.
These moves will drive up the capital ratios of Switzerland's two biggest banks, with CS at 13.7% and UBS, whose ratio stood at 10.8% at the end of September, climbing higher towards tough new rules due from 2013.
At the core of the tripartite Swiss operation is the decision to take on $49bn of toxic UBS assets — $31bn in the US and $18bn of non-US debt — into the new entity. This will be funded by $6bn of UBS equity acquired via the government and $54bn from the SNB.