UBS Troubles - Not Just Billions Lost

UBS AG will write off a further US$10 billion in losses from the U.S. subprime lending market, the leading Swiss bank said Monday. It has been forced to raise billions in capital through ownership share sales to the government of Singapore investment arm and an unidentified investor in the Middle East. The Government of Singapore Investment Corp., a sovereign-wealth fund, is investing CHF11 billion (Swiss francs) (US$9.75 billion), while an undisclosed strategic investor in the Middle East is contributing CHF2 billion francs (US$1.77 billion).

UBS said it will post a loss for the fourth quarter and may now record a loss for the full year as well. That comes on top of the 4.2 billion francs written off in its third quarter, making 14.2 billion francs ($12.6 billion) in losses from the subprime crisis by UBS this year. Once as reliable as one of the expensive precision watches for which Switzerland is famed, UBS management now looks anything but safe, efficient and prudent.

In October the bank downgraded the value of some assets by more than 4 billion francs (US$3.4 billion) because of exposure to bad U.S. mortgages. The write down led to losses of 830 million francs (US$712 million) in the period ending Sept. 30, the first time in nine years the bank reported a quarterly operating loss.

The Swiss bank's losses from its illconceived bets on America's low-income mortgage market now stand at around US$14.2 billion, putting it neck-and-neck with Citigroup as the biggest loser from the growing sub-prime crisis.

Not Our Favorite Swiss Bank

Long time members of the Sovereign Society know that we never have recommended UBS as a Swiss bank for offshore accounts -- and that was not only because of its monster size and impersonal service. What concerns us is the UBS anti-privacy policy.

The merger of Swiss Bank Corp and Union Bank of Switzerland creating UBS AG was approved by the U.S. Federal Reserve Board in 1999 -- but only after UBS supinely agreed to provide the U.S. government with all information "necessary to determine and enforce compliance with . . . [U.S.] federal   laws." This surrender went far beyond the financial information required to be exchanged under the existing U.S.-Swiss Tax Treaty and it also nullified Swiss bank secrecy laws that usually require a court order to release private banking information.

UBS caved in after the U.S. government threatened to shut down the bank's extensive American financial operations. The UBS sell out was bad news for financial   privacy seekers - and it blew a large hole in the much vaunted concept of Swiss "bank secrecy."

Then and now we advise U.S. and other potential depositors to avoid UBS AG and any Swiss bank that has active U.S. financial operations and offices beyond a mere "representative office."  A similar privacy killing deal was made between the Fed and Credit Suisse when that leading Swiss bank merged with First Boston.

If you need advice on the best Swiss banks, the Sovereign Society will be pleased to assist you. Just join us! Click here: http://www.web-purchases.com/SVS/WSVSH716