UBS took $4.4 billion in writedowns at the end of the third quarter, announcing a total net exposure of $39 billion to subprime-related securities.
Moody's also criticised the bank's decision to mark its collateralised debt obligation (CDO) holdings to model, rather than using a market-based benchmark. "Given the ongoing deterioration in the performance of the subprime collateral backing the CDOs, we expect the bank will likely need to take further meaningful writedowns on this portfolio. We have noted UBS is marking its super-senior CDOs to model, and this can currently lead to a lower level of markdowns than at banks that are referencing similar securities to the relevant ABX indices," it wrote.
The decision did not affect UBS's senior debt and deposit ratings, which remain at AAA. Moody's commented this represents the high probability that the Swiss government would intervene to support UBS in a crisis. However, further BSFR downgrades would hit the bank's other credit ratings too, it warned.