World’s biggest banks hit by credit crisis

Two of the world’s biggest banks warned yesterday that they have been hit by exposure to bad debt in the sub-prime US mortgage sector

UBS, the Swiss investment bank and one of London’s major employers, made a pre-tax loss in the third quarter of 726m Swiss francs (£304 million), its first loss in nearly 5 years.

UBS’s new chief executive Marcel Rohner said their third quarter results were disappointing and that they are taking steps to strengthen their market risk management and control framework.

UBS said it expected to make a profit for the last quarter of 2007.

Secondly Japan’s largest bank, Mitsubishi UFJ Financial, said its write-downs on such investments will be 6 times worse than anticipated. The bank has raised concerns of lower annual bonuses and massive job cuts in the City, threatening the wider UK economy.

Financial services make up 10% of Britain’s annual economic output. But if connected sectors such as law and consulting are included, it is more than 25%.

A fall in City bonuses would hit consumer spending in the City and the South East - the core of the UK’s economy.

Finally, 2 top City employers, Deutsche Bank and Credit Suisse, will reveal the extent of their losses later in the week.

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