LONDON: Regulators slapped $1.5bn in fines on Swiss banking giant UBS yesterday, the second-largest amount ever, for rigging the key global Libor interest rate in a deepening scandal threatening more than a dozen other banks.
The investigations by Swiss, British and US regulators revealed evidence of massive misconduct in the setting of the Libor rate, a global benchmark affecting products from student loans to mortgages.
The bank said the settlement, equivalent to ¤1.2bn, would likely push it into a net loss of between 2.0 and 2.5bn Swiss francs ($2.2-$2.7 bn) in the fourth quarter.
The bank’s share price showed a gain of 1.51 percent to 15.48 Swiss francs in midday trading as investors welcomed the closing of the probe.
The Libor rate is a reference point for vast ranges of financial contracts around the world worth about $300 trillion, and revelations that it had been rigged have damaged the reputation of the City of London financial centre although misconduct is believed to have occurred wider afield in global banking.
“During the course of these investigations, we discovered behaviour of certain employees that is unacceptable,” UBS chief executive Sergio Ermotti said in the statement.
“Their misconduct does not reflect the values of UBS nor the high ethical standards to which we hold every employee.”
UBS said it had agreed to pay £160m ($260m) in fines to the UK Financial Services Authority, 59m Swiss francs ($64m) the Swiss Financial Market Supervisory Authority (FINMA) and $1.2bn to the US Department of Justice and the Commodity Futures Trading Commission (CFTC).
UBS said its Japanese subsidiary would also plead guilty to a US criminal offence.
The bank, the biggest in Switzerland, will pay more three times the amount of the settlement reached in June with British bank Barclays, another one of the more than dozen banks investigated for trying to rig global interest rates.
Several are reportedly in advanced talks with regulators about settling the allegations, including Royal Bank of Scotland and Deutsche Bank.
Last week, British regulators made the first three arrests in the scandal that has shaken faith in the integrity of the global financial system.
UBS was the first bank to reveal problems in the rate-setting process of the Libor, an acronym for London Interbank Offered Rate.
A select list of banks provide their own information on the rates they offer to other banks.
Regulators found UBS employees had manipulated the information provided to benefit the bank’s trading position and influence the perception of UBS’s creditworthiness during the 2007-2008 financial crisis.
Britain’s FSA said that “misconduct was extensive and widespread”, while Switzerland’s FINMA said “UBS severely violated ... proper business conduct.”
The FSA said it found records of over 2,000 requests to manipulate Libor information, and that all the data it had provided was at risk of having been manipulated.
FINMA said most of the manipulation requests were made by a trader in Tokyo, who also contacted employees at other banks and independent brokers to try to influence their Libor submissions. UBS said its Japanese subsidiary would plead guilty under to one count of wire fraud.
AFP
