London, 15 September 2011 -- Moody's Investors Service has today placed the C/A3 standalone financial
strength rating and Aa3 long-term debt and deposit ratings of UBS
AG on review for possible downgrade. The short-term Prime-1
ratings of UBS AG has been affirmed. As part of the action UBS
Deutschland's long-term rating of A2 as well as its Prime-1
rating was also put on review for possible downgrade.
The primary focus of Moody's review will centre on ongoing weaknesses
in the Group's risk management and controls that have become evident
again by the events leading to UBS announcing a loss due to unauthorised
trading by a trader in its Investment Bank. While the situation
is still being investigated UBS currently expects losses in the range
of US$2 billion.
Moody's believes that a loss of that magnitude would be manageable
for the Group given its sound liquidity and capital position. However
the losses call into question the Group's ability to successfully
complete the rebuilding of its Investment banking operations. Therefore,
the review will also consider the implications such an event could have
for management's ability to continue to grow IB revenues in an appropriately
risk contained way and the potential impact on profitability of a further
setback on this front. In a similar vein, we will also consider
the potential implication such an event could have for the reputation
of UBS with regards to its Private Banking Clients as well as its Wealth
Management Business.
Moody's acknowledges the progress UBS has made in improving its
risk management functions since the crisis revealed considerable shortcomings
in this area. However, we have continued to express concerns
with regards to the ability of management to develop a robust risk culture
and effective control framework while at the same time trying to re-establish
its position in certain market segments. The events of today suggest
that this remains a key downside risk for the Group.
More generally, such losses are also a reminder of the complexity
and opacity that is inherent in capital markets businesses. Moody's
has commented on various occasions regarding the risks to which such complexity
and opacity give rise. We continue to review how best to reflect
those risks in bank ratings.
Moody's notes that the review is unlikely to lead to downgrades
of more than one notch.
The methodologies used in this rating were Bank Financial Strength Ratings:
Global Methodology published in February 2007, Incorporation of
Joint-Default Analysis into Moody's Bank Ratings: A Refined
Methodology published in March 2007, and Moody's Guidelines for
Rating Bank Hybrid Securities and Subordinated Debt published in November
2009. Please see the Credit Policy page on www.moodys.com
for a copy of these methodologies.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
Moody's considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
a rating.
Moody's adopts all necessary measures so that the information it
uses in assigning a rating is of sufficient quality and from sources Moody's
considers to be reliable including, when appropriate, independent
third-party sources. However, Moody's is not
an auditor and cannot in every instance independently verify or validate
information received in the rating process.
Please see Moody's Rating Symbols and Definitions on the Rating
Process page on www.moodys.com for further information on
the meaning of each rating category and the definition of default and
recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history. The date on
which some ratings were first released goes back to a time before Moody's
ratings were fully digitized and accurate data may not be available.
Consequently, Moody's provides a date that it believes is
the most reliable and accurate based on the information that is available
to it. Please see the ratings disclosure page on our website www.moodys.com
for further information.
In addition to the information provided below please find on the ratings
tab of the issuer page at www.moodys.com, for each
of the ratings covered, Moody's disclosures on the lead rating
analyst and the Moody's legal entity that has issued each of the
ratings.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has
issued the rating.
London
Robert Thomas
Senior Vice President
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
London
Johannes Wassenberg
MD - Banking
Financial Institutions Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's places UBS AG's ratings on review for possible downgrade