switzerland and ubs scandal

International financial marketsGroup Switzerland

Eric IriajenLeopold HenselShin Yuan HuangVanish PatelSana Usmani

University of Westminster, London, November 7, 2011

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AgendaSwitzerland in the financial Crisis

November 7th, 20112 Global Financial Markets Presentation - Switzerland

1 Switzerland’s Economic Structure

2 Business Freedom

3 Financial Institutions

4 Government Intervention

5 The UBS Case

6 The Euro Crisis and the Speculation against the Swiss Franc

7 Economic Future of Switzerland

8 References

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Switzerland’s Economic StructureKey Numbers

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Gross Domestic Product (Real)

535.65 billion CHF (2009) 68’662 CHF GDP p.c. (2009) – CHF/Pound: 1,4/1

EmploymentStructure

Primary: 3.7% Secondary: 22.85% Tertiary: 73.5 %

Export

Most important: pharmaceuticals, food, watches, tourism, mechanical engineering and financial services

147.4 billion Euro in 2010 (52.5% of GDP)

Trade Surplus 14.6 billion EURO

Employment Average unemployment rate 2009: 2.8% 4.547 million people labour force

Global Financial Markets Presentation - Switzerland

Sources: www.bfs.admin.ch, epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/

November 7th, 2011

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GDP compositionSource: CIA World Bank

4 Alphas takeover of Baldor November 7th, 2011

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Global financial impact on Switzerland Index of Economic Freedom

April 20115 Alphas takeover of Baldor

What is Economic Freedom?

Switzerland is 5th in the 2011 world ranking, 1st out of 43 countries in the European region

Comparison Switzerland, United Kingdom and United States.

General description

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Economic Situation

Graph Compare

6 Global Financial Markets Presentation - Switzerland November 7th, 2011

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The Financial Sector(1/2)Is important locally…

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6% of the workforce is responsible for 12% of the Swiss GDP

Responsible for a net surplus of 12 billion CHF on the balance of payment

Swiss Banks have 11.5 trillion francs AuM

Swiss banks hold over 2,000% asset value of GDP

Some numbers Mainly insurances, banks and –

newly - hedge funds

Bank System: Universal banks (UBS and CS), cantonal banks, and foreign controlled banks 327 institutions

Customer confidentiality and political stability

…and the structure

Global Financial Markets Presentation - Switzerland November 7th, 2011

Source: http://www.swissworld.org/

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The Financial Sector(2/2)…as well as globally

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The BIS and the WEF are headquartered in Switzerland

Known as a global tax evasion hub serious conflicts with OECD countries

BCBS Basel III

General description

Shares of AuM in international private banking, 2009

Switzerland 27%

United Kingdom 25%

Luxemburg 11%

Caribbean 12%

Singapore and Hong Kong 10%

United States 8%

Other 7%


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Government Intervention (1/2)General description and Switzerland

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Quantitative Easing is a form of government intervention

Method of monetary policy

Rarely occurs

Global financial crisis effect

General description

Secured savings up to 100’000 CHF pp

Saving of the UBS by the State and the national Bank

Barely deficit spending in opposite to other countries

Switzerland


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Government Intervention (2/2)Swiss stimulus compared to other countries

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Sources: Non banking: Economic World (until Dec 2010) Banking: Bloomberg (until Sept 2011)


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The UBS case (1/3)UBS in 2007 and how the drama started


Largest asset manager in the world 3.3 trillion AuM

Change from pure wealth management to investment banking

Biggest bank in Switzerland and significant impact on economy and culture

Situation 2007

High exposure in American junk bonds

Threatened by upcoming tax problems with USA and EU

Big share of swiss economy

Risk factors

Solution: Saved by external investors and the state of Switzerland

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The UBS case (2/3)The Stock of UBS since 2007

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Source: www.comdirect.de


1. April UBS announce loss of 12 billion for first

quarter

10. Dec 2007 UBS announces

Capital raise

Kweku Adoboli looses 2,8 billion

frncs

4th quarter 08, UBS announces net loss of 8 billion and outflow of 80 billion in assets

16. Oct. the government

announces to save UBS

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Credit suisse stock UBS stock

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UBS Bad Bank

SNB

Government

Ownership bad bank -

1 CHFBuy back

option

Loan max. 54 billion

Mandatory convertible bonds

6 billion

Cash

Max 6 billion equity

Cash

Illiquid assets

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The Swiss Franc Spekulation The Euro/CHF Excange Rate since 2007

15


Oct. 2007peak at 1,68

Sept. 2008Lehman Crash

Since 2010With the bad financial situation of Greece as the Euro debt crisis starts

Aug. 2011US loose AAA Rating

6. Sept 2011SNB sets a low boarder of 1,20


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Economic future of Switzerland

1616

Oijop

Still one of the wealthiest nations in the world, with a high chance of keeping that place

A risk factor although is, that its economy depends heavily on the world economy

Importance of offshore banking is unclear.

The exchange rate plays a big role, since over a half of its exports go into the EU. SNB Intervention bears risk of inflation.

Assumptions

November 7th, 2011 Global Financial Markets Presentation - Switzerland

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References• CIA worldfact book, (2011). Switzerland. [Online] Available from

https://www.cia.gov/library/publications/the-world-factbook/geos/sz.html [Accessed 31/10/2011]

• BBC, (2011). Financial Glossary. [Online] BBC. Available from <http://www.bbc.co.uk/news/business-15060416> [Accessed 03/11/2011]

• Schweizer Bundesamt fuer Statistik . [Online] Available from http://www.bfs.ch

• Trading Economics, (2011). Switzerland Interest Rate. [Online] Trading Economics. Available from <http://www.tradingeconomics.com/switzerland/interest-rate> [Accessed 04/11/2011]

• Economic Watch, (2010). Spain Stimulus package. [online] Economic watch. Available from http://www.economywatch.com/economic-stimulus-package/spain.html [accessed 06/11/2011]

• Index of Economic Freedom, (2011). Switzerland. [Online] Available from http://www.heritage.org/Index/Country/Switzerland [Accessed 25/10/2011]

• Swiss World, (2011). Switzerland Economy. [Online] Available from http://www.swissworld.org/en/economy/?gclid=CNSa8rPKkawCFQ8ntAodbS4KnQ [accessed 28/10/2011

• Trading Economics, (2011). Switzerlnad GDP Growth chart. [Online] Available from http://www.tradingeconomics.com/switzerland/gdp-growth [Accessed 28/10/2011]

• Bank of International Settlements, (2011). Basel III. [Online] Available from http://www.bis.org/bcbs/basel3.htm [Accessed 01/11/2011]

1717 November 7th, 2011 Global Financial Markets Presentation - Switzerland

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Thank you for your attention!

Time for discussion and questions


switzerland and ubs scandal

Economy & Finance