On August 12, UBS announced its results for the second quarter of 2008, which included a net loss of $331 million on write downs of $5.1 billion. On the same day, UBS anounced that it would buy back $18.6 billion of auction-rate securities from its clients in response to governmental investigations. Also, UBS disclosed plans to separate its wealth management business from its investment banking and asset management segments.
Massachusetts securities regulators filed a civil suit against UBS for its role in the collapse of the credit markets. The charges claim that UBS's investment bank and brokerage divisions misstated the risk of investing in certain securities and actively tried to hide the falling values from investors.
The Swiss central bank demanded that investment banks UBS and Credit Suisse maintain higher capital stocks. Given the ongoing credit crunch, the central bank believes that current capital requirements are too low to ensure that the firms can continue operations as normal. UBS and Credit Suisse are a huge part of the Swiss economy, so ensuring their viability is of interest to the government as well.
After a damaging case involving a UBS banker helping U.S. clients to avoid taxes emerged, U.S. authorities began investigating other UBS clients. Feeling pressure from both U.S. authorities and E.U. officials, UBS may divulge privacy information on 20,000 of its American clients.
The Bear Stearns fire sale to JPMorgan rattles investors in UBS, the bank with, at that point, the largest cumulative writedown due to subprime mortgages. The crucial question is whether UBS could be brought down by a similar run on the bank.
UBS's lost almost twice as much money as the median loss expected by analysts, largely because writedowns on US mortgage backed securities rose to $14 billion.
Following write-downs of over $3bn in its third-quarter earnings release, UBS announced on December 10, 2007, that it would take another $10bn write-down for the fourth quarter. The firm also announced that it would issue $11.5bn in new equities to sell to investors from Singapore and the Middle East in an attempt to shore up capital.
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