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It was 9 billion. UBS is on the hook for the first five billion in losses, the Swiss National Bank for the next nine, and UBS anything else above that.
by eloff 4y ago
It was 9 billion. UBS is on the hook for the first five billion in losses, the Swiss National Bank for the next nine, and UBS anything else above that.
- _nalply 4y agoBut perhaps after some point, since UBS is too big to fail, the Swiss National Bank will again back UBS indefinitely. In other words: UBS 5 billion then Swiss National Bank 9 billion then UBS as long as they can and finally Swiss National Bank the rest.
- pg_1234 4y agoNo ... in the worst case scenario the Swiss protect deposits, possibly nationalize the infrastructure needed to service those deposits, then let the rest of the structure collapse into bankruptcy. You don't bankrupt your national economy to protect foreign speculators. You salvage the part that your citizens depend on (and were meant to be able to trust). Once you're talking 100 billion plus, global investor confidence will recover over time long before you recover from a financial hit like that. Basically the approach that Sweden took in 2008.
- OJFord 4y agoIs that a common structure? Seems a bit odd to me to want a backer for the middle bit, but I suppose be so confident that it won't be worse than that that you're happy with the tail?
- ot 4y agoYes, every insurance works like that: deductible, then coverage, then you're on the hook again.
- OJFord 4y agoTrue! Good point. Assuming it's the same in this kind of deal as insurance I'm familiar with then, it's just.. yeah, ideally you wouldn't, but you can't get (well, I suppose there's a price..?) someone to take all your risk, so you just beat it down to some acceptable level that you can't imagine needing more than.
- Uvix 4y agoAlthough in this case, with the insurance agent being the one to push UBS to go through with the deal, I would have thought UBS could get better terms.