Bloomberg News

UBS Reports Cheaper Money-Market Loans Than Credit Suisse

October 03, 2011

(Updates Libor submissions from second paragraph.)

Oct. 3 (Bloomberg) -- UBS AG, Switzerland’s biggest bank, says it can borrow funds in the money markets at a lower rate than Credit Suisse Group AG, even after unauthorized trading lost it $2.3 billion.

UBS reported it can borrow dollars from other lenders for three months at 0.411 percentage point, according to today’s submission for the British Bankers Association’s London interbank offered rate fixings. Credit Suisse, which unlike its rival refused state help in 2008, said it can fund at 0.425 percentage point.

Libor is calculated as a borrowing benchmark from levels that banks say they can fund at, and there have been doubts about the veracity of the numbers since the credit crunch in 2007. UBS lost Chief Executive Officer Oswald Gruebel and said it may be unprofitable in the third quarter because of the activities of a trader in London.

“Libor always used to be a useful guide,” said Gary Jenkins, head of fixed-income at Evolution Securities Ltd. in London. “I’m not sure if that applies any more.”

UBS spokesman Dominik Von Arx and Credit Suisse spokesman Adam Bradbery at Credit Suisse, both in London, declined to comment.

“The BBA does not compile Libor, the data is sent in confidence directly from contributor banks to an independent calculation agent” which publishes the data, John Ewan, the director of the London-based group, said in an e-mailed statement.

Global Benchmark

Libor rates for 10 currencies over 15 maturities are produced daily for the BBA, which asks contributors for the level at which they can borrow “in reasonable size just prior to 11 a.m.” London time on each business day, according to the BBA’s website. The average of the submissions is used as a benchmark for banks’ unsecured borrowings worldwide.

UBS reported it can borrow euros at 1.435 percentage points, the lowest of the 16 contributing banks, according to the BBA. Credit Suisse’s 1.6 percentage-point figure was the highest. The composite three-month euro Libor was 1.498 percent, compared with 0.378 percent for the dollar benchmark.

During the financial crisis in 2008, there were complaints that panel participants may have submitted inaccurate information for Libor and that their rates didn’t reflect borrowing costs. That prompted ICAP Plc, the biggest broker of transactions between lenders, to bring in the New York Funding Rate as an alternative.

UBS plunged in Zurich trading today, falling 3 percent to 10.22 Swiss francs ($11) as of 2 p.m. local time, while Credit Suisse dropped 3.6 percent to 23.13 francs.

UBS is rated Aa3 by Moody’s Investors Service, a step below Credit Suisse’s Aa2 grade. Standard & Poor’s rates UBS at A+ and Credit Suisse one level lower at A. Both rating companies are reviewing UBS for possible downgrades after the trading loss.

--With assistance from Gavin Finch in London. Editors: Paul Armstrong, Michael Shanahan

To contact the reporter on this story: John Glover in London at johnglover@bloomberg.net

To contact the editor responsible for this story: Paul Armstrong at parmstrong10@bloomberg.net


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