The sub-prime mortgage crisis continues to hammer financial institutions around the world as the two largest banks in Europe announced further losses to their balance sheets. Switzerland's UBS AG and Germany's Deutsche Bank AG today declared additional write-downs over and above those already announced, leading to speculation that the pain in financial markets is far from over.

The hardest hit of European banks
The worst affected by far in Europe is UBS, already reeling under the effects of a $18.4 billion loss announced last year. Now, to compound its problems, comes the news that it would be forced to write down an additional $19 billion of assets in the worst crisis in the bank's history. The announcement in 2007 had been its first declaration of an annual loss since UBS was created from the merger of Union Bank of Switzerland and Swiss Bank Corporation in 1998.

UBS chairman and former CEO Marcel Ospel, who had been a prime architect in the creation of UBS in 1998, became the latest high-profile casualty in this ongoing turmoil as the bank announced that he would not be seeking re-appointment. He was scheduled to be re-elected at the bank's AGM on 23 April, but has now removed himself from consideration.

Although Ospel took, in his words, ''responsibility for the bank's situation'', he believed he ''made all necessary contributions'' to help in the matter. He also said that he ''remains very confident in the future prospects of UBS''.

He will be succeeded by general counsel Peter Kurer, who  joined UBS in 2001 and has been a member of the group executive board since 2002. Earlier losses have already led to the resignations of former CEO Peter Wuffli, finance chief Clive Standish and investment banking head Huw Jenkins, and Ospel becomes the latest to join the list.

The current CEO, Marcel Rohner, predicted tough times ahead in 2008, although they didn't intend to conduct emergency sales of securities at ''distressed or inappropriate prices''.

UBS said that Kurer will work closely with the board to ensure that the institution not only implements the appropriate remediation following the current crisis, but also establishes optimal, permanent governance and leadership solutions for the bank's future. The bank also unveiled plans to create a new business that would handle US property assets which had severely declined in values in recent times.

In order to tide over the crisis, UBS announced its intentions to raise as much as $15.1 billion through a rights issue in an effort to replenish capital. This is in addition to the $13 billion already raised from investors in Singapore and the Middle East. UBS said its Tier 1 capital ratio, a key measure of solvency, will be at about 10.7 percent after the rights offering is completed.

In this exercise, it joins peers like Citigroup and Merrill Lynch who have already taken the rights issue route. New York-based Citigroup and Merrill Lynch said in January they will receive $14.5 billion and $6.6 billion from investors respectively, after getting $7.5 billion and $5.6 billion cash infusions in November and December to tide over liquidity concerns which have led to the collapse of Bear Stearns.

UBS's holdings of sub-prime assets fell to about $15 billion by the end of last month from $27.6 billion on Dec. 31, and Alt- A assets, which fall between prime and sub-prime, were cut to about $16 billion from $26.6 billion. Auction-rate securities positions, which are also subject to valuation uncertainties, rose to about $11 billion from $5.9 billion.

Bad times catching up with Deutsche Bank
Deutsche Bank's losses have been lower, but no less significant at about $3.9 billion. Germany's biggest bank in terms of market value today announced that it expects to write off about €2.5 billion ($3.9bn; £1.9bn) in the first quarter of 2008 on leveraged loans, commercial real estate and residential mortgage-backed securities because of the current global credit turmoil. This is in addition to the $3.6 billion (€2.3 billion) of markdowns the bank reported for 2007.

The firm, due to issue its quarterly results at the end of April, will cut the value of leveraged-buyout and commercial real-estate loans and residential mortgage-backed securities, the German bank said. Last month it had reported ''exceptionally difficult'' trading conditions, warning it may miss its 2008 profit target.

In February, Deutsche Bank reported a 48 per cent fall in profit for the last quarter of 2007, which was preceded by a a €2.2 billion exposure to US sub-prime debt in October last year. It had been relatively untouched by the ongoing crisis as compared to the American giants, and boosted profit last year after skirting the worst of the U.S. sub-prime mortgage market meltdown that left Zurich-based UBS and Citigroup Inc. of New York with record losses. But now, the bad times seem to be catching up.

Due to the sub-prime crisis, the world's largest banks and securities firms have posted write downs and credit losses of more than $208 billion since the beginning of 2007. The largest among them include Citigroup, Merrill Lynch and JPMorgan Chase in the US, BNP Paribas in France, HSBC in the UK, Royal Bank of Scotland in Scotland, UBS in Switzerland and Deutsche Bank in Germany. According to German financial regulator, BaFin, such losses could reach as much as $600 billion.