Trump's tariffs stir the foreign exchange market, UBS stops promoting foreign exchange derivatives to clients

UBS has asked employees to reduce the sales of complex foreign exchange derivatives.

On Tuesday, July 29, media reports cited three informed sources stating that UBS has notified its client managers to stop promoting a complex foreign exchange derivative called "Range Target Profit Forward" (abbreviated as RTPF) to most clients.

The underlying reason is the high tariff policy announced by Trump in early April, which triggered significant fluctuations in the US dollar, causing many UBS clients to incur substantial losses on their RTPF investments. This has forced UBS to urgently halt the sale of such products and even compensate over 100 clients to soothe emotions and restore its reputation, as external doubts about the sales practices of these products and their suitability for clients continue to rise.

RTPF: Limited profits, unlimited losses, suitable only for high-risk tolerators

RTPF is a structured foreign exchange product specifically designed for high-net-worth clients, operating on the principle that—clients agree with the bank that as long as the exchange rate of the US dollar against the Swiss franc remains within a certain range, they will exchange currencies at a fixed interest rate. If the exchange rate deviates from this range, the contract must still be enforced. The result is that clients may continue to exchange currencies at extremely unfavorable rates, leading to significant losses.

This type of product is inherently high-risk and should only be sold to professional investors. Currently, it is restricted or strictly regulated in the UK, Spain, and several Asian markets. However, some of UBS's clients are not "experts," and some clients have invested using money from mortgaged properties without understanding the risks, which is extremely risky.

One UBS client revealed that his client manager recently emphasized that such high-risk structured foreign exchange products (like RTPF) should now be limited to "the most professional investors" and that a stricter review of product suitability is required.

This client stated that the client manager, who used to actively promote products, has now become much more cautious: "This time, he didn't even bring any materials, just came to 'chat.' He said they have been notified not to actively promote these products anymore."

Another informed source added that UBS is still selling such products, but on a significantly reduced scale.

After the announcement of Trump's tariffs, the US dollar quickly depreciated, triggering loss conditions for many RTPF contracts, forcing UBS's clients to continue exchanging currencies at extremely poor rates, with some clients suffering "unpredictable" substantial losses.

UBS was forced to activate its crisis management mechanism, stop promoting these products to most clients, pay "goodwill compensation" to over 100 clients, initiate internal reviews, risk assessment training, scrutinize the sales practices of at least six client managers, and began contacting affected clients gradually since the beginning of this year