UBS and the Subprime Mortgage Crisis


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Case Details:

Case Code : FINC061
Case Length : 22 Pages
Period : 2001-2009
Pub. Date : 2010
Teaching Note :Not Available
Organization : UBS AG
Industry : Banking
Countries : Switzerland, US

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Excerpts Contd...

Why did it Happen?

In the aftermath of the crisis, UBS initiated an investigation into the causes as demanded by the Swiss Federal Banking Commission (SFBC). The investigations were carried out by 20 lawyers from the company. SFBC also submitted a report on the causes of write-downs at UBS due to the exposure to the US subprime mortgages...

The Remediation Plan

In July 2008, UBS submitted a remediation plan to SFBC. The report specified the remedial action UBS proposed to take in the areas of strategy, governance, risk management, risk control, finance, balance sheet management, and compensation...

The Aftermath

In October 2008, the Swiss government tried to bail UBS out of the liquidity crisis by buying a 9.3% equity stake in the bank through mandatory convertible notes with a coupon rate of 12.5%, thus pumping in US$ 5.2 billion...

Exhibits

Exhibit I: UBS - Three Year Income Statement (2006-08)
Exhibit II: UBS - Organizational Chart
Exhibit III: A Note on Credit Default Swaps
Exhibit IV: UBS - Risk Management and Control Principles (2007)

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