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UBS toxic-asset fund will stay in Switzerland

A fund created to absorb $60 billion worth of UBS's toxic assets will be based in Switzerland and not the Cayman Islands, the Swiss National Bank (SNB) said on Wednesday.

The government and central bank had come under fire in recent weeks for proposing that the fund, a critical vehicle for stabilising Switzerland's largest bank, could be domiciled in an offshore account.

The holding fund, called the SNB StabFund in German, is part of a government-sponsored rescue package that was first announced in mid-October as the financial crisis threatened to topple banks worldwide.

UBS's toxic holdings, meaning assets now illiquid largely because of the subprime-mortgage crisis, should be fully transferred from the bank's books into the new fund by March 2009.

The bank has worked out an agreement granting it the option of repurchasing the assets at a later date.

Shares in UBS closed on Wednesday at SFr14.80 ($12.27), up 2.71 per cent on the Zurich exchange.