UBS knew of LTCM lending breach in 1996
Saturday 10 October 1998
According to a 15-page internal document detailing the bank's relationship over three years, UBS credit officers in New York recommended against extending credit to LTCM but were "overruled for business reasons".
Chairman Mathis Caballiavetta and three other board directors quit UBS, Europe's largest bank, last week after it revealed $700m of losses on investments in the troubled fund
The document, which was leaked yesterday, is a further embarrassment to UBS, which has seen its market value seriously eroded by the affair.
The details became public as it emerged that John Meriwether, the LTCM founder, signed over a 20-acre plot of land in California to his wife on 278 August, just weeks before the hedge fund went cap in hand to the US Federal Reserve.
The transfer has sparked suspicions that Mr Meriwether was trying to move personal assets out of the reach of creditors. Some senior partners who borrowed extensively to invest in the firm have been reported to be facing personal bankruptcy because the fund's near collapse.
However, a spokesman for Mr Meriwether said that the transfer had nothing to do with seeking protection in the event of bankruptcy or lawsuits. It was, he said, done as part of "estate planning that had been going on for a year".
UBS last night refused to comment on the contents of the leaked document. A spokeswoman said: "UBS informed on the LTCM dealings at the press conference on 2 October. In the light of the ongoing investigation, the bank cannot comment further."
The document compiled by UBS's North American credit control department, known internally as CATS-NY, was prepared at the request of various units in the bank which were interested in dealing with LTCM.
The report said: "Leverage was very high. On balance sheet 27.2 times, off balance sheet not disclosed, but we assume total leverage is at least 250 times."
It went on: "When credit facilities were first requested in 1994, CATS- NY recommended that the request be denied due to the significant exceptions of the policy and the start-up nature of the counterparty. Credit facilities were approved at that time for business reasons."
Continued unwinding by hedge funds of their positions caused havoc in the bond markets yesterday. In London the December gilt future plunged 4.5 per cent at one point, a move which dealers said was unprecedented.
The dollar also came under continued selling pressure as it ended its worst week against the Japanese yen since leaving the gold standard in 1971. The dollar has fallen nearly 14 per cent in a week.
Stock markets enjoyed a brief respite. The FTSE 100 closed up 124.5 points at 4,823.4.
- 1 Crystal meth addict 'gouged out his eyes and ate them' while high on drug, Australian MP claims
- 2 As a white man, I'm surprised more women aren't tweeting the hashtag #KillAllWhiteMen
- 3 The ten most unequal developed countries in the world
- 4 Saudi Arabia 'seeking to head United Nations Human Rights Council'
- 5 Toddler throws a tantrum at the White House – in front of Barack Obama
JK Rowling horrified by Harry Potter actor Matthew Lewis's raunchy photoshoot
Saudi Arabia 'seeking to head United Nations Human Rights Council'
The ten most unequal developed countries in the world
Toddler throws a tantrum at the White House – in front of Barack Obama
Irish people are travelling home from all over the world so they can vote to legalise gay marriage
As a white man, I'm surprised more women aren't tweeting the hashtag #KillAllWhiteMen
Scotland may have to leave the EU even if it votes to stay in, David Cameron confirms
Report finds that Britain's wages are the most unequal in Europe
Almost a third of school pupils believe 'Muslims are taking over our country', study claims
The day that Britain resigned as a global power
Gay marriage 'Bert and Ernie' cake bakery found guilty of discrimination in Northern Ireland
iJobs Money & Business
£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...
£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...
£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...
£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...