A letter from UBS

About a week ago, my father, worried about the financial trouble at UBS, ask me, his “economist” son, if he should take out the money he has there. “Yes”, I answered. Obviously, I was kidding. It’s all gonna turn out fine I thought.

Well, not so fast. We all received that letter from UBS’ Wealth Management & Business Banking to let us know that they had the situation under control. Are they fearing a serious bank run à la Northern Rock? If anything, this letter will make people even more worried, as Sebastian explained.

The rational behaviour, after receiving a letter like this, would be to go the bank, withdraw all your money, and put it in another bank. This would obviously be the non-cooperative outcome, leading to a series of unfortunate events. This letter is meant to achieve the optimal outcome, the cooperative one, where people leave there money there and it gradually becomes business as usual for UBS.

As Sebastian pointed out, this is Switzerland, not England or the US. I don’t see people running to the bank like crazy. People seem to trust their bank, or their government, who would take the situation under control so no one would be affected. Where else could I put my money anyway? Credit Suisse? Gimme a break!