Oct. 16 (Bloomberg) -- UBS AG, Switzerland's biggest bank, was forced into a $59.2 billion government bailout after piling up the biggest losses of any European lender from the global credit crisis.

UBS will get a 6 billion Swiss francs ($5.2 billion) capital injection from the government to help it set up a fund for as much as $60 billion of toxic assets that will be supported by the central bank, the government said in a statement from the capital Bern. Credit Suisse Group AG raised 10 billion francs from private investors including the Qatar Investment Authority and announced a third-quarter loss, it said today from Zurich.

The measures will help the banks meet tighter capital rules that the Federal Banking Commission is planning to introduce, the regulator said, and reduce risky assets on UBS's balance sheet. The government plans to raise deposit guarantees and is ready to back short- and medium-term interbank liabilities of Swiss banks, after countries across Europe took similar measures.

``At last the Swiss are doing something,'' said Peter Thorne, an analyst at Helvea in London. `They risked getting left behind their European rivals and paying the price for slowness.''

UBS fell 1.78 francs, or 8.9 percent, to 18.30 francs by 9:06 a.m. in Swiss trading. Credit Suisse declined 2.8 francs, or 6.1 percent, to 43.10 francs.

The Swiss National Bank, the country's central bank, will support the new fund with as much as $54 billion in loans, the government said. The SNB will receive interest on the loans and is entitled to a share in any profits. It will also supervise the transfer and liquidation of assets.

Mortgage Securities

The transaction will leave UBS with ``essentially zero'' risk related to U.S. subprime, Alt-A, prime, commercial real estate and mortgage-backed securities as well as student loan- backed securities and reference-linked notes, Chief Executive Officer Marcel Rohner said on a conference call. The bank will still have $4.3 billion in monoline risk and $4.7 billion in leveraged finance, he said.

UBS reported third-quarter net income of 296 million francs today. Wealth management and business banking clients withdrew a net 49.3 billion francs in the third quarter, with all regions showing outflows.

The bank will sell 6 billion francs in mandatory convertible notes to the government. After conversion, the Swiss government would own 9.3 percent in the bank, UBS said.

``The Federal Council is confident that this package of measures will contribute to the lasting strengthening of the Swiss financial system,'' the government said. ``The resulting stabilization is beneficial for overall economic development in Switzerland and is in the interests of the country as a whole.''

Credit Suisse reported a loss of 1.3 billion francs in the three months ending Sept. 30 after a pretax loss of 3.2 billion francs from its investment banking division. It had writedowns of 2.4 billion francs in leveraged finance and structured products.

To contact the reporter on this story: Warren Giles in Geneva at wgiles@bloomberg.net

Last Updated: October 16, 2008 03:24 EDT