Thanks tothis gradualist approach, UBS had been expected to take write-downs in managedincrements of SFr2 billion-3 billion over a period of several quarters. It nowappears that the bank has incorporated market values into its model, sendingits fourth-quarter write-downs into orbit. The change of approach may be on theadvice of auditors and regulators but it is more likely to reflect a desire byUBSs bosses toavoid months of speculation about the banks exposure, something that MarcelRohner, the chief executive, described as distracting .
In aparticular indignity for a bank long associated with conservatism, concernsabout the level of UBSs capital ratio had even started to surface. Hence the moves tostrengthen its tier-one capital, an important measure of bank solidity, bySFr19.4 billion, a great deal more than the write-down. The majority of thatmoney will come from sovereign-wealth funds, the white knights of choice fortodays bank in distress. Singapores GIC, which manages thecity-states foreign reserves, has pledged to buy SFr11 billion-worth of convertiblebonds in UBS; an unnamed Middle Eastern investor will put in a further SFr2billion. UBS will also raise money by selling treasury shares, and save cash byissuing its 2007 dividend in the form of shares. Its capital ratio is expectedto end up above 12% in the fourth quarter, a strong position.The majority ofthat money will come from sovereign-wealth funds, the white knights of choicefor todays bank in distress.
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