Moody's lowers UBS rating due to subprime fears

"The downgrade of the BFSR reflects Moody's view that UBS's subprime-related exposures have a large loss content – some of which has been recognised to date - which negatively affects the bank's earnings stability and our understanding of the quality of its risk management", Moody's announced today.

UBS took $4.4 billion in writedowns at the end of the third quarter, announcing a total net exposure of $39 billion to subprime-related securities.

Moody's also criticised the bank's decision to mark its collateralised debt obligation (CDO) holdings to model, rather than using a market-based benchmark. "Given the ongoing deterioration in the performance of the subprime collateral backing the CDOs, we expect the bank will likely need to take further meaningful writedowns on this portfolio. We have noted UBS is marking its super-senior CDOs to model, and this can currently lead to a lower level of markdowns than at banks that are referencing similar securities to the relevant ABX indices," it wrote.

The decision did not affect UBS's senior debt and deposit ratings, which remain at AAA. Moody's commented this represents the high probability that the Swiss government would intervene to support UBS in a crisis. However, further BSFR downgrades would hit the bank's other credit ratings too, it warned.

See also:UBS warns of continuing subprime risk
UBS takes $3.4 billion hit

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact or view our subscription options here:

You are currently unable to copy this content. Please contact to find out more.

You need to sign in to use this feature. If you don’t have a account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here