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UBS ready to buy back “bad bank” toxic assets

UBS wants its not-so toxic assets back Reuters

The Swiss National Bank (SNB) has confirmed that UBS has paid off all its debts relating to a 2008 state bailout, paving the way for the banking giant to buy back once-toxic assets worth billions of francs.

At the end of 2008, UBS was forced to hand over CHF38.7 billion ($41.5 billion) of its risky securities to the central bank’s Stabilisation Fund (StabFund), set up to prevent UBS’s mortgage related losses spiraling out of control during the financial crisis.

The SNB granted UBS a loan of CHF25.8 billion to help finance the transfer of toxic assets to the StabFund – a debt that has now been fully paid off, according to an SNB statement on Friday.

UBS has already made clear its intention to exercise an option to buy back the remaining StabFund assets, that had not already been sold or expired, once the loan was paid off.

Under the terms of the bailout deal, UBS must pay the SNB CHF1 billion plus half of the assets’ net value. At the end of June, the remaining assets had an estimated nominal value of CHF7.5 billion, but a more precise calculation will be worked out by an independent expert group over the next three months.

At the end of July, UBS said the fund’s eventual value when bought back could be anything between an estimated CHF3 billion and CHF7 billion.

The Stabilisation Fund has been widely praised as being one of the most successful bank bailouts of the financial crisis. Far from costing tax payers’ money, it has made money for the central bank – to the tune of CHF830 million in the first six months of 2013 alone.

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SWI - a branch of Swiss Broadcasting Corporation SRG SSR

SWI - a branch of Swiss Broadcasting Corporation SRG SSR