Today the Swiss National Bank presented its Financial Stability Report 2009. A large part of which, understandably, is dedicated to giving some historical background of the current crisis from 2007 to now, not specific to Switzerland. In this review the report also describes the measures used to help UBS as follows:
The resilience of UBS, on the other hand, was strengthened by both private capital – some of it already raised in the early stages of the crisis – and a package of government measures taken in October 2008. The main element of this package, put together by the Swiss government, the Swiss Federal Banking Commission (SFBC; now the Financial Market Supervisory Authority – FINMA) and the SNB, was the possibility for UBS to transfer up to USD 60 billion(1) of illiquid assets to a special purpose vehicle (SPV) of the SNB (the SNB StabFund) in order to facilitate their orderly liquidation.
Did they really write orderly liquidation? Yes they did. Interestingly enough, the same language was used in the introductory remarks by Thomas Jordan, one of the three directors of the SNB, to SNBs end-of-year media conference in Zurich in December 2008:
orderly liquidation of troubled assets.
I am perplexed – well not really. This was sold to the Swiss as a transfer of currently illiquid assets from UBS to the SNB StabFund with the idea that there was a chance of recovering most, if not all of the investment and possibly even make a profit, if the assets just were held to maturity.
However, this now sounds more like a permanent liquidation (read write-off) which hardly allows for recovery of all the investments made, let alone a profit.
It is not surprising, since it was clear from the beginning that in order to cleanse UBSs balance sheet, the worthless crap needs disappear from it.
SNBs outlook for 2009, which is already half over but never mind, is for a strong and generalized economic downturn: Read the rest of this entry »
