Wednesday, 30 January 2008

Losing big

Which bank will come top of the table of sub prime losers.

Today, UBS put down a very strong claim. Today, it announced a further $4 billion of losses, bringing its total sub prime losses to around $18 billion. This unprecedented losses should come as no surprise. At one point last year, the bank held about $40 billion of sub prime related debt.

With losses of this magnitude, the bank's capital is disappearing fast. The FT reported that UBS's "BIS Tier I capital ratio – a key measure of its financial strength – amounted to 8.8 per cent at the end of December." It went on to say that 8.8 per cent was "well below the 11-12 per cent ratio the bank has as its goal." If this capital ratio falls below 8 percent, then the bank would be in serious trouble with financial regulators.

With this in mind, UBS are frantically looking around for extra capital. Anyone out there interested in bailing out UBS?

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