Switzerland moved to restore confidence in its banking system on Thursday, agreeing to fund a vehicle that would take on most of the toxic debts held by UBS and injecting SFr6bn (€3.9bn) to help recapitalise its former national banking champion. The intervention in UBS came as its cross-town rival, Credit Suisse, raised SFr10bn from strategic investors including the Qatar Investment Authority. The proceeds of UBS’ fundraising will be ploughed back into the bail-out vehicle, backed by the central bank and designed to hold up to $60bn in mainly US mortgage assets. The plan represents the third capital raising by UBS this year. Unlike US and UK moves to take direct equity in big banks, the Swiss government will buy SFr6bn of mandatory convertible notes, which pay a fixed coupon but will convert into shares at a later date. Politicians criticised the use of state funds to aid private companies but ministers said it was on attractive terms and essential to put UBS back on an even keel. UBS denied the government’s stake was a “rescue”, because the bank did not face collapse.

This entry was posted by Gwen Robinson on Friday, October 17th, 2008 at 5:46 and is filed under Capital markets. Tagged with credit suisse, ubs. Edit this entry.