 "UBS agrees to buy back rescue fund for $3.8 bn")
UBS AG, Switzerland's largest bank, agreed to pay $3.8 billion to buy back the fund for toxic assets set up by the central bank in 2008 as part of a bailout.
The Swiss National Bank said the price corresponds to its contractual share in the fund's equity at the end of September, according to a statement on Friday. Under the agreement, UBS paid the Zurich-based central bank $1 billion plus 50 per cent of the remaining value. At the end of 2012, the SNB would have received $3.27 billion under the same formula.
The Stability Fund was established in October 2008 as part of measures to stabilise UBS and bolster the Swiss financial system. UBS spun off $38.7 billion of risky assets into the fund, while the government provided 6 billion francs ($6.6 billion) of equity and the SNB made a loan to support the assets as they were being run down.
"The StabFund based its work on the intrinsic values of the assets, which were calculated from the future cash flows to be expected," the SNB said in the statement. "When the market situation was good, assets were sold rapidly, while restraint was exercised when market setbacks were experienced."
'Less Favorable'
The fund consisting of securities, loans and derivatives was jointly run by three members of the SNB and two from UBS, with the a central bank representative acting as chairman. A group of about 70 UBS employees managed the sale of the assets.
At the end of September, a month after the final repayment paved the way for UBS to buy back the remaining assets, the fund "was left mostly with cash equivalents," giving it a value of $6.5 billion in equity, the SNB said.
"U.S. securities in particular recorded cash flows over the entire life of the portfolio in excess of the purchase price paid to UBS at the outset," the central bank said. "By contrast, the situation for European assets was less favorable, since the euro debt crisis from 2010 had a negative impact on the value of these positions."
SNB said it has earned interest income of $1.6 billion over the term of the loan in addition to the $3.8 billion share in the equity. The purchase price will have a "favorable impact" on 2013 results, it said without providing details.
The Swiss National Bank said the price corresponds to its contractual share in the fund's equity at the end of September, according to a statement on Friday. Under the agreement, UBS paid the Zurich-based central bank $1 billion plus 50 per cent of the remaining value. At the end of 2012, the SNB would have received $3.27 billion under the same formula.
The Stability Fund was established in October 2008 as part of measures to stabilise UBS and bolster the Swiss financial system. UBS spun off $38.7 billion of risky assets into the fund, while the government provided 6 billion francs ($6.6 billion) of equity and the SNB made a loan to support the assets as they were being run down.
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The government sold its investment in UBS for a profit of 1.2 billion francs.
"The StabFund based its work on the intrinsic values of the assets, which were calculated from the future cash flows to be expected," the SNB said in the statement. "When the market situation was good, assets were sold rapidly, while restraint was exercised when market setbacks were experienced."
'Less Favorable'
The fund consisting of securities, loans and derivatives was jointly run by three members of the SNB and two from UBS, with the a central bank representative acting as chairman. A group of about 70 UBS employees managed the sale of the assets.
At the end of September, a month after the final repayment paved the way for UBS to buy back the remaining assets, the fund "was left mostly with cash equivalents," giving it a value of $6.5 billion in equity, the SNB said.
"U.S. securities in particular recorded cash flows over the entire life of the portfolio in excess of the purchase price paid to UBS at the outset," the central bank said. "By contrast, the situation for European assets was less favorable, since the euro debt crisis from 2010 had a negative impact on the value of these positions."
SNB said it has earned interest income of $1.6 billion over the term of the loan in addition to the $3.8 billion share in the equity. The purchase price will have a "favorable impact" on 2013 results, it said without providing details.