More SubPrime worries – the Eastern banks are now propping up the Western ones
Posted by markharrison on December 10, 2007
The BBC’s Bob Preston has made some comments that have worried me more than a little.
Firstly, he noted that Swiss giant UBS has just announced FURTHER losses of £4.9 billion due to the subPrime crisis – these are on top of the £1.8 billion it announced in October.
UBS is still standing up OK though, although these losses mean that it will make an overall loss this year, it’s just managed to raise £4.8 billion – not from its own Government (Mr. Darling, take note), but from the Government of Singapore’s Investment Corporation.
To put things in perspective, that’s about 3 times as much money as it looks like Northern Rock is going to end up needing to patch its problems.
UBS’s borrowing is in the form of “convertible shares” – firstly the Singapore Government lends UBS the money – at 9% interest – for two years. Then, at the end of that, it can convert that loan into shares if it wants to. A nice little earner for a government sitting on a lot of cash.
On the other side of the Atlantic, Citigroup has just raised $7.5 Billion – and it is having to pay 11% interst – this time to the Abu Dhabi Investment Authority.
Now, if banks like Citigroup are having to pay 11% interest to borrow money, and even the normally-conservative UBS are paying 9%, it doesn’t bode well for UK borrowers.