Unwinding the rescue

The sale of the Confederation’s stake in 2009

The Confederation’s investment was short-lived. On 19 August 2009 the Federal Council decided to convert the mandatory convertible notes and to sell the resulting shares. The Confederation received 332.2 million UBS shares, which were placed with institutional investors for about CHF 5.5 billion. In exchange for waiving its claims to future coupons, it received a further CHF 1.8 billion from UBS. The total proceeds of CHF 7.2 billion corresponded to a profit of about CHF 1.2 billion on the original investment of CHF 6 billion.¹ UBS itself described the transaction as the moment at which the Confederation recovered its full investment together with net proceeds of CHF 1.2 billion.² Commentators later noted that the Confederation had earned a return of about 20 per cent in ten months.³

The timing of the sale fell into a period of great tension between Switzerland and the United States over the American clients of UBS. On the same day, 19 August 2009, Switzerland and the United States signed an agreement on a request for administrative assistance concerning some 4,450 UBS client accounts, the resolution of which is described in chapter G.III.⁴ By selling its shares when it did, the Confederation ended its role as a shareholder in a bank whose negotiations with a foreign government it was conducting on behalf of the state. Critics argued that the stake could have been held longer and sold at a higher price. The handling of the notes was also raised in a parliamentary intervention.⁵ The Federal Department of Finance later summarised the outcome in terms that have become part of the Swiss narrative of the crisis: the rescue of UBS cost the taxpayer nothing.⁶

The StabFund in operation

The StabFund had a longer life. Its first year was difficult. As the value of many of its assets continued to fall in 2009, the fund recorded losses of about USD 4.8 billion in its first year of operation.⁷ The equity cushion provided by UBS protected the National Bank against the first losses, with the warrants on UBS shares as a second line of protection. The fund’s managers deliberately avoided selling in depressed markets. They held the assets, collected the cash flows and used them to repay the National Bank’s loan, selling only when prices had recovered.⁸ The loan of the National Bank was repaid in full on 15 August 2013, a little less than five years after the fund had been created.⁹

The repayment of the loan opened the way for UBS to exercise its option. The price depended on the valuation of the remaining portfolio by independent experts, with a contractual formula that allocated the first USD 1 billion of the remaining equity to the National Bank and divided the rest equally between the National Bank and UBS.¹⁰ On 7 November 2013 UBS bought the StabFund from the National Bank for USD 3.762 billion, which corresponded to the National Bank’s contractual share in the fund’s equity as at the end of September 2013. Together with interest income of USD 1.6 billion on the loan, the National Bank’s total return from the operation amounted to about USD 5.2 billion. The National Bank described the transaction as the successful conclusion of a challenging undertaking whose purpose had never been to generate a profit but to strengthen the Swiss financial system. The fund paid a final dividend in December 2013 and was liquidated in the first quarter of 2014.¹¹

The figures that circulate in the literature differ slightly according to what they count. The Federal Department of Finance speaks of a profit of USD 3.76 billion for the National Bank, which corresponds to the purchase price paid by UBS, while swissinfo reported a total windfall of USD 5.4 billion, including the interest income. The figure of about USD 5.2 billion given by the National Bank itself is the most reliable. Oswald Grübel, by then the former chief executive of UBS, called the StabFund the best piece of business the central bank had ever done.¹² The chairman of the Governing Board of the National Bank, Thomas Jordan, who had run the fund’s general partner, drew a different conclusion. He stated that the financial success of the StabFund was not reason enough to endorse government rescues of banks. In his view, the too-big-to-fail legislation had to ensure that no such operation would be needed again.¹³

Jordan’s remark deserves emphasis because the profitable outcome has sometimes been read as proof that the rescue involved no real risk. That reading ignores the counterfactual. The National Bank lent USD 25.8 billion against assets that nobody else would buy, at a time when the further course of the American property market was unknown. The profit arose because the Federal Reserve and other central banks stabilised the markets for the securities concerned, because the fund could wait, and because the world avoided a depression. None of these conditions was certain in October 2008. For the Zurich financial centre, the lesson was that the state could save a big bank at a profit once without being able to count on doing so a second time.

The rescue and the franchise

The rescue did not by itself restore UBS. The bank continued to lose money in 2009 and returned to profit only in the fourth quarter of that year. It reduced its balance sheet and its risk exposure by about half, sold its Brazilian subsidiary UBS Pactual and exited the cross-border business with clients domiciled in the United States.¹⁴ Outflows from wealth management continued for several quarters, partly because clients feared for the safety of their assets and partly because the American tax investigation called into question the promise of confidentiality on which much of the business rested. In the following years UBS reduced its investment bank sharply and concentrated on wealth management, a strategic reorientation that chapter G.IV places in the context of the too-big-to-fail rules. The UBS that took over Credit Suisse in 2023 was, in its business model, a product of the lessons it had drawn from 2008.

Notes

1. Yale Program on Financial Stability, “Switzerland: UBS Capital Injection, 2008” (as above). ↩
2. UBS, “2008–2015” (company history) (as above). ↩
3. economiesuisse, “UBS-Rettung: Gewinne für Bund und SNB”, 1 November 2013, https://www.economiesuisse.ch/de/artikel/ubs-rettung-gewinne-fuer-bund-und-snb. ↩
4. Agreement between the United States of America and the Swiss Confederation on the request for information from the Internal Revenue Service regarding UBS AG, signed at Washington, DC, on 19 August 2009, https://www.irs.gov/pub/irs-drop/us-swiss_government_agreement.pdf. The parties estimated the number of accounts falling under the request at approximately 4,450. See also chapter G.III. ↩
5. Postulate 09.3348 Fetz, “Umgang mit der UBS-Pflichtwandelanleihe und mit UBS-Aktien in staatlichem Besitz”, submitted in the Council of States on 20 March 2009, Curia Vista, https://www.parlament.ch/de/ratsbetrieb/suche-curia-vista/geschaeft?AffairId=20093348 (data retrieved via the Parliament’s open data service, https://ws.parlament.ch/odata.svc/Business). The postulate asked the Federal Council for an overview of the scenarios for selling or holding the notes and shares. The Federal Council proposed to accept it, and the business was closed on 10 June 2010. ↩
6. Federal Department of Finance, “Differences relative to the stabilisation of UBS, Swiss and Axpo, and to COVID-19 credits”, https://efd.admin.ch/efd/en/home/financial-affairs/ubs-takeover-credit-suisse%20/differences-stabilisation-ubs-swiss-axpo-covid-19-credits.html. ↩
7. Allen, swissinfo.ch, 31 October 2013 (as above). ↩
8. Swiss National Bank, press release of 8 November 2013 on the sale of the StabFund to UBS, https://www.snb.ch/public/publication/en/www-snb-ch/publications/communication/press-releases/2013/pre_20131108/publications0_en/pre_20131108.en.pdf: “When the market situation was good, assets were sold rapidly, while restraint was exercised when market setbacks were experienced, such as in 2011.” The loan was repaid from principal repayments (USD 13.4 billion), interest payments (USD 3.9 billion) and sales (USD 15.8 billion). UBS’s equity contribution of 10 per cent of the assets served as primary loss protection, and the warrant to purchase 100 million UBS shares as secondary loss protection. ↩
9. Swiss National Bank, press release of 16 August 2013 (as above). ↩
10. Swiss National Bank, press release of 16 August 2013 (as above). ↩
11. Swiss National Bank, press release of 8 November 2013, “UBS purchases StabFund from the SNB”, https://www.snb.ch/public/publication/en/www-snb-ch/publications/communication/press-releases/2013/pre_20131108/publications0_en/pre_20131108.en.pdf. ↩
12. Allen, swissinfo.ch, 31 October 2013 (as above). ↩
13. swissinfo.ch, “UBS buys back StabFund”, 8 November 2013, https://www.swissinfo.ch/eng/business/ubs-buys-back-stabfund/37289204. The EFD figure is in the page cited above. ↩
14. UBS, “2008–2015” (company history) (as above). ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of September 2025.