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SNB Sets Up Special Purpose Vehicle (SPV) to Buyout Illiquid Assets
Thursday, 16 October 2008 09:04:28 GMT  |  DailyFX Research
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SNB's Roth said UBS rescue won't affect monetary policy. The SNB today announced that it decided to loan up to USD 54B to a special purpose vehicle (SPV) set up to take over illiquid assets currently held by UBS. It said a similar offer has been extended to the CS Group, which refrained from making use of such a possibility. The central bank stressed that the loan amount is entirely guaranteed by the portfolio assigned by UBS, i.e. securities valued at USD 60B in the UBS balance sheet, and that given previous write downs it feels that "the risk of further losses on this portfolio is limited". To secure financing the SNB will obtain USD through a USD-CHF swap with the Fed and then turn to the market for refinancing. The SNB will not incur any currency risk and since the operation is conducted in USD it will not affect the SNB's monetary policy. The central bank said the unprecedented step was a contribution to an essential element of the Swiss financial system.

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