UBS faces rating downgrade

16th June 2009, Comments 0 comments

Moody's to review UBS for a possible downgrade of their debt and deposit ratings.

GENEVA -- Ratings agency Moody's Investors Service on Monday said it could downgrade UBS's long term debt and deposit ratings, warning that the Swiss bank's financial troubles were not over.

Moody's said in a statement that it placed Switzerland's biggest bank and its affiliates "on review for possible downgrade" and warned of greater risks to bondholders than previously believed.

The financial difficulties the bank faced "were unlikely to be short-lived" despite the multi-billion dollar cash injections UBS has received from the Swiss government and new shareholders, it said.

"The review reflects Moody's view of the considerable challenges that UBS continues to face in its two largest business lines -- Investment Banking and Wealth Management," said David Fanger, Moody's senior vice president.

"Given the magnitude of the bank's challenges and the length of time it may take to fully address them, the bank's ratings are vulnerable to a downgrade of more than one notch," Fanger said.

"The bank has also experienced a significant turnover of senior managers over the past two years, which gives us some concerns about the continuity and effectiveness of management," he added.

Moody's also highlighted continued customer losses due to international pressure on banking secrecy as Switzerland's banking practices have come under close scrutiny as a result of the global financial crisis.

Moody's announcement came after the close of the stock market on Monday when UBS shares fell 5.6 percent.

AFP / Expatica

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