The main recipient will be UBS AG, which is being offered up to US$54 billion (S$79.9 billion) so that it can part with securities that have gone bad since the start of the worldwide financial crisis.

Switzerland's largest bank, which racked up losses and writedowns totaling about 45 billion francs (S$58 billion) over the past year, will also receive 6 billion Swiss francs from the government in return for mandatory convertible bonds.

The measures will allow UBS to dispose of about US$31 billion in high-risk assets linked to the US subprime market and US$18 billion in non-US securities, by handing them over to a specially-created vehicle whose sole purpose is to sell them off.

The vehicle will be controlled by the Swiss National Bank but managed by UBS, and any profit will be shared equally between the two after a one-off payment of US$1 billion to the SNB.

UBS will also have the opportunity to pass a further US$9 billion in other securities to this vehicle, including the US$5 billion worth of auction rate securities the bank was recently forced to buy back from US investors.

As part of a package to support the banking sector, the government said it will also raise private customers' bank deposit guarantee limit above the current 30,000 Swiss francs.

The exact level has yet to be determined, though Switzerland's acting finance minister, Eveline Widmer-Schlumpf, said the threshold of 50,000 euros (S$99,900) recently agreed by the European Union would be taken as a guideline.

Meanwhile, UBS rival Credit Suisse said it had also been offered government assistance but would not make use of it at this time, choosing instead to raise about 10 billion francs on the open market. The largest amount would come from the Qatar Investment Authority, a government-controlled fund, it said.

While Switzerland's second largest bank has been less affected by the global financial turmoil, it said it expected to report losses of 1.3 billion francs for the third quarter of the year.

UBS expects to report a profit of almost 300 million francs for the period - its first since the second quarter of 2007.

Thursday's announcement caused turmoil on the Swiss stock exchange, initially sending UBS shares 7.8 per cent lower before investors took heart from the measures. By late morning the bank's shares were trading 4 per cent higher at 20.88 francs.

Credit Suisse shares were up almost 8 per cent at 49.50 francs in Zurich.

Analysts at Zuercher Kantonalbank welcomed the fact that the government measures will allow UBS to dispose of a large part of its bad assets in one fell swoop, but warned that they come at a considerable cost to the bank in terms of loan repayments to the SNB.

They also noted that UBS has continued to suffer massive capital outflows as clients withdrew 84 billion francs during the past quarter, indicating a further loss of confidence in the Swiss bank.

UBS will have to call an extraordinary shareholders' meeting in November - its third this year - to get approval for the refinancing measures. The bank has struggled to regain investor confidence in recent months after admitting that its so-called 'integrated business model' and lack of management oversight were partly to blame for the risky investment strategies that caused the billion-dollar losses. -- AP