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International financial markets
 Group Switzerland




 Eric Iriajen
 Leopold Hensel
 Shin Yuan Huang
 Vanish Patel
 Sana Usmani


 University of Westminster, London, November 7, 2011
Agenda
Switzerland in the financial Crisis


 1        Switzerland’s Economic Structure

 2        Business Freedom

 3        Financial Institutions

 4        Government Intervention

 5        The UBS Case

 6        The Euro Crisis and the Speculation against the Swiss Franc

 7        Economic Future of Switzerland

 8        References




2 - Global Financial Markets Presentation - Switzerland                 November 7th, 2011
Switzerland’s Economic Structure
Key Numbers

Gross Domestic                           535.65 billion CHF (2009)
Product (Real)                           68’662 CHF GDP p.c. (2009) – CHF/Pound: 1,4/1

                                         Primary: 3.7%
Employment                               Secondary: 22.85%
Structure                                Tertiary: 73.5 %


                                         Most important: pharmaceuticals, food, watches, tourism, mechanical
                                          engineering and financial services
Export
                                         147.4 billion Euro in 2010 (52.5% of GDP)


                                         14.6 billion EURO
Trade Surplus


                                         Average unemployment rate 2009: 2.8%
Employment
                                         4.547 million people labour force
Sources: www.bfs.admin.ch, epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/




3 - Global Financial Markets Presentation - Switzerland                                            November 7th, 2011
GDP composition
Source: CIA World Bank




4 - Alphas takeover of Baldor   November 7th, 2011
Global financial impact on Switzerland
Index of Economic Freedom


                                General description
           What is Economic Freedom?
           Switzerland is 5th in the 2011 world ranking, 1st out of
            43 countries in the European region
           Comparison Switzerland, United Kingdom and United
            States.




5 - Alphas takeover of Baldor                                          April 2011
Economic Situation
Graph Compare




6 - Global Financial Markets Presentation - Switzerland   November 7th, 2011
The Financial Sector(1/2)
Is important locally…



                   Some numbers                               …and the structure
            6% of the workforce is                          Mainly insurances, banks and –
             responsible for 12% of the Swiss                 newly - hedge funds
             GDP
                                                             Bank System: Universal banks
            Responsible for a net surplus of                 (UBS and CS), cantonal banks,
             12 billion CHF on the balance                    and foreign controlled banks 
             of payment                                       327 institutions
            Swiss Banks have 11.5 trillion                  Customer confidentiality and
             francs AuM                                       political stability
            Swiss banks hold over 2,000%
             asset value of GDP

    Source: http://www.swissworld.org/




7 - Global Financial Markets Presentation - Switzerland                               November 7th, 2011
The Financial Sector(2/2)
…as well as globally
             General description
            The BIS and the WEF are headquartered in Switzerland
            Known as a global tax evasion hub  serious conflicts with OECD countries
            BCBS  Basel III


Shares of AuM in international private banking, 2009
Switzerland                                               27%
United Kingdom                                            25%
Luxemburg                                                 11%
Caribbean                                                 12%
Singapore and Hong Kong                                   10%
United States                                             8%
Other                                                     7%



8 - Global Financial Markets Presentation - Switzerland                           November 7th, 2011
Government Intervention (1/2)
General description and Switzerland



              General description                                Switzerland
        Quantitative Easing is a                          Secured savings up to
         form of government                                 100’000 CHF pp
         intervention                                      Saving of the UBS by the
        Method of monetary policy                          State and the national
        Rarely occurs                                      Bank

        Global financial crisis                           Barely deficit spending in
         effect                                             opposite to other
                                                            countries




9 - Global Financial Markets Presentation - Switzerland                         November 7th, 2011
Government Intervention (2/2)
  Swiss stimulus compared to other countries




Sources: Non banking: Economic World (until Dec 2010) Banking: Bloomberg (until Sept 2011)




  10 - Global Financial Markets Presentation - Switzerland                                   November 7th, 2011
The UBS case (1/3)
UBS in 2007 and how the drama started



                      Situation 2007                                  Risk factors
             Largest asset manager in the                      High exposure in American
              world 3.3 trillion AuM                             junk bonds
             Change from pure wealth                           Threatened by upcoming tax
              management to investment                           problems with USA and EU
              banking                                           Big share of swiss economy
             Biggest bank in Switzerland
              and significant impact on
              economy and culture



            Solution: Saved by external investors and the state of Switzerland




11 - Global Financial Markets Presentation - Switzerland                             November 7th, 2011
The UBS case (2/3)
  The Stock of UBS since 2007



                                                               4th quarter 08, UBS
                                  1. April UBS               announces net loss of
                                announce loss of              8 billion and outflow
                                12 billion for first         of 80 billion in assets
                                     quarter

                                                  16. Oct. the
                                                  government                            Kweku Adoboli
                                                 announces to                          looses 2,8 billion
                                                   save UBS                                 frncs
               10. Dec 2007
              UBS announces
               Capital raise




Source: www.comdirect.de




  12 - Global Financial Markets Presentation - Switzerland                                   November 7th, 2011
The UBS case (2/3)
  The Stock of UBS since 2007
        Credit suisse stock                              UBS stock




Source: www.comdirect.de




  13 - Global Financial Markets Presentation - Switzerland           November 7th, 2011
The UBS case (3/3)
The Stock of UBS since 2007

                                                                 SNB            Loan max. 54
                             Ownership
                           bad bank -                                              billion
                               1 CHF
                                                           Buy back
                                                            option


                                                                        Max 6 billion equity
                                                               Cash
            UBS                                                                                Bad Bank
                                         Illiquid assets




                                                     Mandatory
                    Cash                          convertible bonds
                                                      6 billion


                                                           Government




14 - Global Financial Markets Presentation - Switzerland                                                  November 7th, 2011
The Swiss Franc Spekulation
  The Euro/CHF Excange Rate since 2007




                                                                                          6. Sept 2011
                                                                                          SNB sets a low
                                                                                          boarder of 1,20




      Oct. 2007
      peak at 1,68
                                                             Since 2010
                                      Sept. 2008             With the bad financial
                                      Lehman Crash           situation of Greece as the
                                                             Euro debt crisis starts



Source: www.comdirect.de                                                                  Aug. 2011
                                                                                          US loose
                                                                                          AAA Rating

  15 - Global Financial Markets Presentation - Switzerland                                             November 7th, 2011
Economic future of Switzerland



                                                   Assumptions
   Oijop

   Still one of the wealthiest nations in the
    world, with a high chance of keeping that
    place
   A risk factor although is, that its economy
    depends heavily on the world economy
   Importance of offshore banking is unclear.
   The exchange rate plays a big role, since
    over a half of its exports go into the EU. 
    SNB Intervention bears risk of inflation.




                                                                 November 7th, 2011
16 - Global Financial Markets Presentation - Switzerland
References
•    CIA worldfact book, (2011). Switzerland. [Online] Available from
     https://www.cia.gov/library/publications/the-world-factbook/geos/sz.html [Accessed
     31/10/2011]
•    BBC, (2011). Financial Glossary. [Online] BBC. Available from
     <http://www.bbc.co.uk/news/business-15060416> [Accessed 03/11/2011]
•    Schweizer Bundesamt fuer Statistik . [Online] Available from http://www.bfs.ch
•    Trading Economics, (2011). Switzerland Interest Rate. [Online] Trading Economics. Available
     from <http://www.tradingeconomics.com/switzerland/interest-rate> [Accessed 04/11/2011]
•    Economic Watch, (2010). Spain Stimulus package. [online] Economic watch. Available from
     http://www.economywatch.com/economic-stimulus-package/spain.html [accessed 06/11/2011]
•    Index of Economic Freedom, (2011). Switzerland. [Online] Available from
     http://www.heritage.org/Index/Country/Switzerland [Accessed 25/10/2011]
•    Swiss World, (2011). Switzerland Economy. [Online] Available from
     http://www.swissworld.org/en/economy/?gclid=CNSa8rPKkawCFQ8ntAodbS4KnQ [accessed
     28/10/2011
•    Trading Economics, (2011). Switzerlnad GDP Growth chart. [Online] Available from
     http://www.tradingeconomics.com/switzerland/gdp-growth [Accessed 28/10/2011]
•    Bank of International Settlements, (2011). Basel III. [Online] Available from
     http://www.bis.org/bcbs/basel3.htm [Accessed 01/11/2011]



17 - Global Financial Markets Presentation - Switzerland                                  November 7th, 2011
Thank you for your attention!
                                        Time for discussion and questions




18 - Global Financial Markets Presentation - Switzerland                    November 7th, 2011

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Switzerland and UBS Scandal

  • 1. International financial markets Group Switzerland Eric Iriajen Leopold Hensel Shin Yuan Huang Vanish Patel Sana Usmani University of Westminster, London, November 7, 2011
  • 2. Agenda Switzerland in the financial Crisis 1 Switzerland’s Economic Structure 2 Business Freedom 3 Financial Institutions 4 Government Intervention 5 The UBS Case 6 The Euro Crisis and the Speculation against the Swiss Franc 7 Economic Future of Switzerland 8 References 2 - Global Financial Markets Presentation - Switzerland November 7th, 2011
  • 3. Switzerland’s Economic Structure Key Numbers Gross Domestic  535.65 billion CHF (2009) Product (Real)  68’662 CHF GDP p.c. (2009) – CHF/Pound: 1,4/1  Primary: 3.7% Employment  Secondary: 22.85% Structure  Tertiary: 73.5 %  Most important: pharmaceuticals, food, watches, tourism, mechanical engineering and financial services Export  147.4 billion Euro in 2010 (52.5% of GDP)  14.6 billion EURO Trade Surplus  Average unemployment rate 2009: 2.8% Employment  4.547 million people labour force Sources: www.bfs.admin.ch, epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/ 3 - Global Financial Markets Presentation - Switzerland November 7th, 2011
  • 4. GDP composition Source: CIA World Bank 4 - Alphas takeover of Baldor November 7th, 2011
  • 5. Global financial impact on Switzerland Index of Economic Freedom General description  What is Economic Freedom?  Switzerland is 5th in the 2011 world ranking, 1st out of 43 countries in the European region  Comparison Switzerland, United Kingdom and United States. 5 - Alphas takeover of Baldor April 2011
  • 6. Economic Situation Graph Compare 6 - Global Financial Markets Presentation - Switzerland November 7th, 2011
  • 7. The Financial Sector(1/2) Is important locally… Some numbers …and the structure  6% of the workforce is  Mainly insurances, banks and – responsible for 12% of the Swiss newly - hedge funds GDP  Bank System: Universal banks  Responsible for a net surplus of (UBS and CS), cantonal banks, 12 billion CHF on the balance and foreign controlled banks  of payment 327 institutions  Swiss Banks have 11.5 trillion  Customer confidentiality and francs AuM political stability  Swiss banks hold over 2,000% asset value of GDP Source: http://www.swissworld.org/ 7 - Global Financial Markets Presentation - Switzerland November 7th, 2011
  • 8. The Financial Sector(2/2) …as well as globally General description  The BIS and the WEF are headquartered in Switzerland  Known as a global tax evasion hub  serious conflicts with OECD countries  BCBS  Basel III Shares of AuM in international private banking, 2009 Switzerland 27% United Kingdom 25% Luxemburg 11% Caribbean 12% Singapore and Hong Kong 10% United States 8% Other 7% 8 - Global Financial Markets Presentation - Switzerland November 7th, 2011
  • 9. Government Intervention (1/2) General description and Switzerland General description Switzerland  Quantitative Easing is a  Secured savings up to form of government 100’000 CHF pp intervention  Saving of the UBS by the  Method of monetary policy State and the national  Rarely occurs Bank  Global financial crisis  Barely deficit spending in effect opposite to other countries 9 - Global Financial Markets Presentation - Switzerland November 7th, 2011
  • 10. Government Intervention (2/2) Swiss stimulus compared to other countries Sources: Non banking: Economic World (until Dec 2010) Banking: Bloomberg (until Sept 2011) 10 - Global Financial Markets Presentation - Switzerland November 7th, 2011
  • 11. The UBS case (1/3) UBS in 2007 and how the drama started Situation 2007 Risk factors  Largest asset manager in the  High exposure in American world 3.3 trillion AuM junk bonds  Change from pure wealth  Threatened by upcoming tax management to investment problems with USA and EU banking  Big share of swiss economy  Biggest bank in Switzerland and significant impact on economy and culture Solution: Saved by external investors and the state of Switzerland 11 - Global Financial Markets Presentation - Switzerland November 7th, 2011
  • 12. The UBS case (2/3) The Stock of UBS since 2007 4th quarter 08, UBS 1. April UBS announces net loss of announce loss of 8 billion and outflow 12 billion for first of 80 billion in assets quarter 16. Oct. the government Kweku Adoboli announces to looses 2,8 billion save UBS frncs 10. Dec 2007 UBS announces Capital raise Source: www.comdirect.de 12 - Global Financial Markets Presentation - Switzerland November 7th, 2011
  • 13. The UBS case (2/3) The Stock of UBS since 2007 Credit suisse stock UBS stock Source: www.comdirect.de 13 - Global Financial Markets Presentation - Switzerland November 7th, 2011
  • 14. The UBS case (3/3) The Stock of UBS since 2007 SNB Loan max. 54 Ownership bad bank - billion 1 CHF Buy back option Max 6 billion equity Cash UBS Bad Bank Illiquid assets Mandatory Cash convertible bonds 6 billion Government 14 - Global Financial Markets Presentation - Switzerland November 7th, 2011
  • 15. The Swiss Franc Spekulation The Euro/CHF Excange Rate since 2007 6. Sept 2011 SNB sets a low boarder of 1,20 Oct. 2007 peak at 1,68 Since 2010 Sept. 2008 With the bad financial Lehman Crash situation of Greece as the Euro debt crisis starts Source: www.comdirect.de Aug. 2011 US loose AAA Rating 15 - Global Financial Markets Presentation - Switzerland November 7th, 2011
  • 16. Economic future of Switzerland Assumptions  Oijop  Still one of the wealthiest nations in the world, with a high chance of keeping that place  A risk factor although is, that its economy depends heavily on the world economy  Importance of offshore banking is unclear.  The exchange rate plays a big role, since over a half of its exports go into the EU.  SNB Intervention bears risk of inflation. November 7th, 2011 16 - Global Financial Markets Presentation - Switzerland
  • 17. References • CIA worldfact book, (2011). Switzerland. [Online] Available from https://www.cia.gov/library/publications/the-world-factbook/geos/sz.html [Accessed 31/10/2011] • BBC, (2011). Financial Glossary. [Online] BBC. Available from <http://www.bbc.co.uk/news/business-15060416> [Accessed 03/11/2011] • Schweizer Bundesamt fuer Statistik . [Online] Available from http://www.bfs.ch • Trading Economics, (2011). Switzerland Interest Rate. [Online] Trading Economics. Available from <http://www.tradingeconomics.com/switzerland/interest-rate> [Accessed 04/11/2011] • Economic Watch, (2010). Spain Stimulus package. [online] Economic watch. Available from http://www.economywatch.com/economic-stimulus-package/spain.html [accessed 06/11/2011] • Index of Economic Freedom, (2011). Switzerland. [Online] Available from http://www.heritage.org/Index/Country/Switzerland [Accessed 25/10/2011] • Swiss World, (2011). Switzerland Economy. [Online] Available from http://www.swissworld.org/en/economy/?gclid=CNSa8rPKkawCFQ8ntAodbS4KnQ [accessed 28/10/2011 • Trading Economics, (2011). Switzerlnad GDP Growth chart. [Online] Available from http://www.tradingeconomics.com/switzerland/gdp-growth [Accessed 28/10/2011] • Bank of International Settlements, (2011). Basel III. [Online] Available from http://www.bis.org/bcbs/basel3.htm [Accessed 01/11/2011] 17 - Global Financial Markets Presentation - Switzerland November 7th, 2011
  • 18. Thank you for your attention! Time for discussion and questions 18 - Global Financial Markets Presentation - Switzerland November 7th, 2011