Switzerland became the latest European country to bail out its troubled banking sector this morning by injecting SwFr6 billion (£3 billion) into UBS, taking what could become a 9.3 per cent stake in the bank.

Fellow Swiss bank Credit Suisse also raised a total of SwFr10 billion by issuing new shares and bonds to several private investors, including the Qatar Investment Authority (QIA).

UBS will also transfer $60 billion of illiquid toxic assets, including US sub-prime mortgages and student loans, to a new vehicle controlled by the Swiss National Bank (SNB), capping their future losses and reducing the risks on its balance sheet.

The vehicle will be funded by the sale of the SwFr6 billion of shares to the Government in the form of mandatory convertible notes and a SwFr54 billion loan from the SNB.

UBS will later be allowed to buy back the assets after it has paid off the loan. The notes will be converted into normal UBS shares within 30 months of being issued, with the Government allowed to sell on its obligation.

Peter Kurer, UBS’s chairman, said the bank was taking practical steps to eliminate legacy risk and that in these turbulent times it wanted to do everything possible to safeguard the solidity of the bank.

“We thank the Swiss Government and the Swiss National Bank for their willingness to develop a commercial solution under economic terms that will support both the stability of the Swiss financial system and UBS,” he said. “Their efforts and decisiveness to act swiftly demonstrates the professionalism of the Swiss financial centre, to which we are deeply committed.”

The announcement came as UBS reported a SwFr296 million net profit for the third quarter of 2008. However, the bank said that customers had withdrawn almost SwFr50 billion in recent weeks.

Credit Suisse reported a third-quarter net loss of SwFr1.3 billion as trading conditions deteriorated.

Brady Dougan, Credit Suisse’s chief executive, said the bank’s fundraising showed that strategic investors, such as the QIA, had confidence in its strategy and business model.

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