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.
educationTo mark International Women's Day, Sarah Brown on how charities have brought proper joined-up thinking to the delivery of education
South African rhino finally put down after roaming Kruger park for days with horn hacked off and bullet in brain
Lammily: Barbie-like doll hits Kickstarter fundraising target in a day
Belle Knox: How a porn star student from Duke University became bigger than Justin Bieber
Oscar Pistorius trial: Neighbour feared South African athlete would use gun that killed his girlfriend Reeva Steenkamp to shoot himself
Top 10 most expensive cities in the world: Singapore named costliest place to live – but what about London?
Apple's Tim Cook: Business isn’t just about making profit
Thousands of young people forced to go without food after benefits wrongly stopped under 'draconian' new sanctions regime
Ukraine crisis: New navy chief 'defects' and surrenders Crimean HQ as Putin claims ultranationalists forced intervention
Ukraine crisis: Russia dismisses '3am ultimatum' as 'total nonsense'
If you're horrified by a flame-roasted dog, you should be shocked at a hog roast
Britain's top vet sparks controversy with call for ban on slashing animals' throats in 'ritual' slaughters for halal and kosher meat products
- 1 The future of sex: The first female condoms were derided, mistrusted and shunned - but will their modern counterparts catch on?
- 2 South African rhino finally put down after roaming Kruger park for days with horn hacked off and bullet in brain
- 3 Sir Patrick Stewart patches into David Cameron and Barack Obama's Ukraine talks with packet of wet wipes
- 4 Study suggests that 'gaydars' are real - at least for women
- 5 Man stabbed with Legend of Zelda Master Sword in serious condition
iJobs Money & Business
£32000 - £36000 per annum + generous benefits: Pro-Recruitment Group: * TAX * ...
£37000 - £40000 per annum + £20000 benefits package: Pro-Recruitment Group: **...
£30000 - £35000 per annum + generous benefits: Pro-Recruitment Group: Mixed Ta...
£30000 - £40000 per annum + benefits: Pro-Recruitment Group: Personal Tax, FTS...