This will allow the bank to retain a strong tier one capital ratio, even after providing the equity to the newly established entity. Dillon Read Capital Management was a $4 billion fund launched in June of 2005 by former UBS investment bank chief executive John Costas, with the help of then-UBS CEO Peter Wuffli. Per the report, DRCM never had to plan for the three challenges that all hedge funds must confront: maintaining stable capital at affordable rates, recruiting personnel and operations management. This created a system of truly perverse incentives: Since all risk was UBS’ and DRCM’s clients, and since capital was both abundant and inexpensive, the immediate impetus was to buy and position bonds that offered the greatest carry, or differential between the cost of financing and interest paid. For example, UBS committed billions of dollars in capital in late 2005 and early 2006 in a bid to dominate the CDO markets. At the same time, the CDO desk management was petitioning for capital limit increases. These factors include, but are not limited to: (1) the extent and nature of future developments in the United States mortgage market and in other market segments that have been or may be affected by the current market crisis and their affect on the remaining net and gross exposures to be held by UBS following the transactions described herein, (2) developments affecting the availability of capital and funding to UBS and other financial institutions, including any changes in UBS’s credit spreads and ratings; (3) other market and macro-economic developments, including movements in local and international securities markets, credit spreads, currency exchange rates and interest rates; (4) changes in internal risk control and limitations in the effectiveness of UBS’s internal processes for risk management, risk control, measurement and modeling, and of financial models generally; (5) the possible consequences of ongoing governmental investigations of certain of UBS’s past business activities; (6) the degree to which UBS is successful in implementing its remediation plans and strategic and organizational changes, and whether those plan and changes will have the effects anticipated; (7) changes in the financial position or creditworthiness of UBS’s customers, obligors and counterparties, and developments in the markets in which they operate; (8) management changes and changes to the structure of UBS’s business divisions; (9) the occurrence of operational failures, such as fraud, unauthorized trading and systems failures; (10) legislative, governmental and regulatory developments, including the possible imposition of new or more stringent capital requirements and of direct or indirect regulatory constraints on US’s activities; (11) competitive pressures; (12) technological developments; and (13) the impact of all such future developments on positions held by UBS, on its short-term and longer-term earnings, on the cost and availability of funding and on UBS’s capital ratios.

Finance

The fund will be financed by $6bn from UBS and a $54bn loan from the central bank. The bank said that the Qatar Investment Authority was among the group of global investors that had helped the bank to shore up its finances. The exact level has yet to be determined, though Switzerland’s acting finance minister, Eveline Widmer-Schlumpf, said the threshold of 50,000 euros ($67,400) recently agreed by the European Union would be taken as a guideline. Indeed, a delegation from the Swiss finance and justice ministries flew to Washington last week. Such entities or persons may have a relationship with, or provide corporate finance or other services to, or serve as directors of, relevant companies. Furthermore, UBS may have or have had a relationship with or may provide or has provided corporate finance, capital markets and/or other financial services to the relevant companies. The firm has been one of the European finance houses to be hardest hit by the problems in the US housing market. Also in 1988 Senn took over the chairmanship of UBS; succeeding Senn in the presidency was Robert Studer, an investment banker who had previously served as director of the bank’s finance department. Switzerland’s Federal Department of Finance hailed the moves, saying “significant steps are being made towards the strengthening of capital in the big banks.