UBS, the Swiss-based banking group, has unveiled terms of a near SwFr16 billion ($16 billion) rights issue, one of the biggest in European corporate history, as it moves to repair its ravaged balance sheet.

The rights, which are fully underwritten, will be offered to existing shareholders at a discount of more than 30 per cent.

If successful, UBS will also raise almost $1 billion more than expected.

The move by the bank, which has written down $37 billion of its exposure to risky American home loans, comes just a day after it offloaded $15 billion of its investment risk to BlackRock, the US money manager.

That sale prompted speculation, reported in The Times today, that UBS was poised to launch its rights issue.

Shareholders gave the bank approval to increase its share capital last month.

UBS will be offering 760,295,181 shares at SwFr21 each, a discount of 31.46 per cent on last night's closing price. UBS shares have fallen more than 35 per cent this year and are down by more than two thirds compared with a year ago.

The bank is going to its existing owners for fresh capital as its European rivals seek capital to shore up their financial strength.

Royal Bank of Scotland is asking for £12 billion, HBOS is seeking £4 billion and Bradford & Bingley wants £300 million.

When completed, UBS's rights issue will be the fourth largest in European corporate history, according to Thomson Reuters, the data provider.

It will rank behind the RBS deal, a €15 billion cash call by France Télécom, the telecommunications giant, in 2003, and a €13.1 billion capital-raising by Fortis, the Belgo-Dutch financial services group completed late last year.

France Télécom launched its rights issue as part of a €45 billion rescue plan five years ago.

The telecommunications giant employed a syndicate of 21 banks to work on its deal, while UBS has hired JP Morgan, Morgan Stanley, BNP Paribas and Goldman Sachs for its transaction.

It is understood that the underwriters will be offloading their risk to a further group of 18 financial institutions. UBS hopes to complete the issue over the next three weeks.

However, later in the year UBS's equity issue will be relegated to fifth position in the league of super-deals, if Carlsberg, the Danish brewer, is successful in its bid to raise almost €20.7 billion from investors. Carlsberg's rights issue is expected in the third quarter.

UBS shares were flat this morning at SwFr30.64 after speculation over the capital raising drove them down more than 4 per cent yesterday.

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