Financial Risk Management at Union Bank of Switzerland ( Page 2)

Abstract

Union Bank of Switzerland (UBS) is one of the largest investment managers in the world. UBS serves institutional investors and high net-worth individuals by offering a range of products and services including mutual funds, asset management, corporate finance, and estate planning. UBS also provides securities underwriting services, mergers and acquisitions advice and trades in fixed-income products, and foreign exchange. The company faces many risks. These include interest rate risks, currency risks, equity risks, credit risks, liquidity risks and capital adequacy risks. The case outlines the risks and the mechanisms UBS employs to mitigate them.

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Background Note contd...

In 1994, as profits plummeted, stockholder Martin Ebner, tried to gain control of UBS. After failing in his attempt to have president Robert Studer charged with criminal fraud, he almost thwarted Studer's election to the chairmanship.

In 1998 UBS merged with Swiss Bank Corp in one of the most celebrated mergers in banking history. The bank lost $1.6 billion after the Long-Term Capital Management hedge fund went bankrupt in October 1998. This prompted chairman Mathis Cabiallavetta to resign.

As difficulties in integration of the pre-merger entities continued in 1999, UBS retreated from riskier markets, selling some $2 billion in real estate, and its 25% stake in Swiss Life/Rentenanstalt. That year, UBS bought Bank of America's European and Asian private banking operations and Allegis Realty Investors, a US real estate investment management firm. In 2000, UBS reorganized yet again and bought US broker Paine Webber (now UBS Paine Webber).


More...

Exhibit: I UBS: Income by Segment

Market Risk

Exhibit: II UBS: Interest Rate Sensitivity Position

Exhibit: III UBS: Breakdown of Assets and Liabilities by Currencies

Credit Risk

Exhibit: IV UBS: Breakdown of Credit Exposure

Exhibit: V UBS: Maturity Analysis of Assets and Liabilities

Liquidity Risk

Exhibit: VI UBS: Financial Instruments Risk Position Capital Adequacy

Bibliography

        Case Code   FINA015
   Case Length    12 Pages
              Period    2003
 Organization     Union Bank of Switzerland
        Pub Date     2003
Teaching Note    Not Available
     Countries    Switzerland
      Industry    Banking and Investments

Issues

Financial Risk Mnaagement, Union Bank of Switzerland

UBS; Union Bank of Switzerland; Currency risks; Equity risks; Credit risks; Capital adequacy risks; Interest rate risks; Liquidity risks; Market risk; ERM at Credit Suisse

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.