UBS and the Subprime Mortgage Crisis
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Case Details:
Case Code : FINC061
Case Length : 22 Pages
Period : 2001-2009
Pub. Date : 2010
Teaching Note :Not Available
Organization : UBS AG
Industry : Banking
Countries : Switzerland, US
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FINC061) click on the button below, and select the case from the list of available cases:
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"The sizable write-downs that UBS incurred in the last 12 months cannot be explained by any single factor. Rather, in hindsight, a whole chain of unfortunate strategic decisions, insufficient follow-ups, and a lack of skepticism in relation to the bank's own processes and systems were contributing factors both at the risk management and the risk control functions.”
- Swiss Federal Banking Commission - UBS Subprime Report, September 2008.
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"In line with our traditional focus, we grew our trading activities in seemingly liquid and high quality securities. The availability of cheap, short-term funding from UBS's strong capital position facilitated this growth, accelerating the expansion of our balance sheet and comparatively high tradable asset inventories. The creation of Dillon Read Capital Management (DRCM) led to an overnight exposure to the US mortgage market. After a range of largely proprietary driven trading activities were transferred into DRCM,
the Investment Bank replaced them with client-driven origination, trading and
structuring of mortgage-backed securities involving principal risk. This
decision was driven by an attempt to close revenue gaps with key competitors in
certain areas of the fixed-income business. In hindsight, these three structural
issues were important factors in the very bad outcome we experienced in the
context of the US real estate market crisis."
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- Marcel Ospel, Former Chairman, UBS in the Letter to the Shareholders, Annual Report 2007.
UBS and the Subprime Mortgage Crisis
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