S&P says may cut UBS long-term debt grade

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Ratings agency Standard & Poor's (S&P) said on Friday that it may cut the long-term debt grade of Swiss bank UBS after a rogue trader cost the bank $2 billion in unauthorised deals.

The agency said it has placed the bank's long term debt grade A+ on watch "with negative implications," as the bank said it may be forced to book a loss for the third quarter due to the fraudulent trade.

S&P's decision came after fellow ratings agency Moody's announced that it would take similar action due to the bank's weakness in risk management.

"The trading loss comes at a time when UBS' profitability has been pressured by factors such as low client activity, and the strong Swiss franc," said S&P.

It believes nevertheless that the loss was manageable if it did not go beyond the announced $2 billion.

Ratings agency Fitch meanwhile affirmed the longterm grade of A+ and shortterm F1+.

"The sizeable trading loss represents a significant set-back in UBS' attempt to restore its investment banking franchise," assessed the agency.

However, it believes that while the bank would book a loss in the third quarter, it should be profitable for the full year.

© 2011 AFP

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