Now it’s the turn of Swiss banking giants UBS AG and Credit Suisse Group AG (CS) to get bailed out. While UBS will receive $60 billion worth support from the Swiss National Bank and other investors, Credit Suisse is raising $8.75 billion from private investors, and a bulk of it will come from Qatar Investment Authority.
The Swiss government will emerge with approximately 9.3% of UBS’s share capital, which it reserves the right to sell to other investors. The bank is scheduled to give over $5 billion immediately.
The Swiss National Bank (SNB) and UBS have reached an agreement to transfer up to $60 billion of currently illiquid securities and other assets from UBS’s balance sheet to a separate fund entity.
With this transaction, UBS caps future potential losses from these assets, secures their long-term funding, reduces its risk-weighted assets, and materially de-risks and reduces its balance sheet, a release said.
These emergency measures have been the order of the days for some time where governments around the world have been trying to prop up their banks and avoid the credit crunch.
US government will buy stakes worth $250 billion in US banks. The US has also announced a $700 billion bailout package to buy toxic assets. The UK governmnet has also announced a $64 billion investment in banks like RBS, Lloyd TSB and HBOS Plc.
In India, the Reserve Bank of India, India’s central bank cut the cash reserve ratio by 1% again today, thereby releasing a total of Rs 40,000 crore into the Indian banking system. The series of CRR cuts in the last fortnight has been about 2.5%, releasing about 1,00,000 crore in the system.
The Swiss Banks In India
UBS has various operations in India which include IT and back office functions (IT infrastructure support), Knowledge Services (KPO) (including research and analytics), Business Process Offshoring (BPO) (including transactions and data processing), Investment Banking, Securities/ Brokerage / Equities Fixed income. At the end of 2006, it employed about 1333 people, which is 1.7% of its global workforce.
Credit Suisse is into private banking, global Treasury, stock brokerage, corporate advisory and banking in the country.
It has invested $113m for a minority stake in Indu Projects, Rs 415 crore in Moser Baer Photo Voltaic, $55m in Park Hotels, Rs 300 crore in IT park project of Vascon Engineers, Rs 150 crore in Binani Cements, Chennai Container Terminal Pvt Ltd (CCT) and 74% jointly with Zeus Infra-management in East India Petroleum Ltd.
(Additional Inputs by Nimesh Sharma)