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.Reuse content