News Column

UBS Bank Fined a Record $1.5 Billion

Dec. 20, 2012

Swiss banking giant UBS has been given a record fine of 1.5 billion dollars by US and British regulators for attempting to manipulate the Libor interbank lending rate, the bank said Wednesday.

"We deeply regret this inappropriate and unethical behaviour," said UBS chief executive Sergio Ermotti. "No amount of profit is more important than the reputation of this firm, and we are committed to doing business with integrity."

The settlement includes payment of 1.2 billion dollars in combined fines to the US Department of Justice and the Commodities Futures Trading Commission, 260 million dollars to Britain's Financial Services Authority (FSA) and 65 million dollars to the Swiss Financial Market Supervisory Authority.

UBS said it has also agreed to admit to committing wire fraud through its Tokyo office in the case of manipulating Libor rates for loans denominated in Japanese yen, among others.

The Zurich-based bank with a staff of around 6,500 in London is the second major bank to be fined over the interbank lending rate scandal. Britain's Barclays bank was ordered to pay 450 million dollars to British and US authorities in June.

The FSA said the misconduct was "extensive and widespread" as UBS traders had "routinely made requests" to colleagues responsible for determining Libor submissions in an effort to benefit their own trading positions.

It said that at least 45 individuals including traders, managers and senior managers were involved in, or aware of, the practice. The regulator recorded at least 2,000 requests for inappropriate submissions and said many more would have been made orally.

Last month, Ghanaian-born trader Kweku Adoboli, 32, was sentenced to seven years in jail for fraud after being found guilty of gambling away 2.2 billion dollars of UBS assets in bad deals.

Adoboli said he did not act alone and was "pressurized" by superiors into taking risks.

Libor is the umbrella term for benchmark rates that underpin the terms of 500 trillion dollars of contracts from mortgages to the cost of corporate lending.

The current internationally-based investigations into Libor rate rigging involve some 20 banks and financial institutions, including German and British banks, such as part-nationalized Royal Bank of Scotland.

UBS said the fines - along with other payouts for mis-selling mortgage debts in the US - were likely to result in the bank recording a loss for the last three months of the year, although it still expected to make a profit for the year as a whole.

The Swiss lender acknowledged its staff had manipulated the borrowing rates it submitted, which were then used to calculate the Libor rate.

According to the FSA, UBS had even given its traders formal responsibility for handling the bank's submissions to the Libor-setting committee at the British Bankers' Association - creating a direct conflict of interest, as the traders could profit depending on what they submitted.

UBS also admitted that its traders had colluded with their counterparts at other banks and brokerages, the FSA said. The bank's Tokyo office had made corrupt payments to brokerages - who helped to bring borrowers and lenders together anonymously in the inter-bank lending market - in order to enlist their support in manipulating Libor.

Commenting on the settlement, UBS chairman Axel Weber said: "The authorities have recognized UBS for the thoroughness of our investigation and our exceptional co-operation."

For more stories on investments and markets, please see HispanicBusiness' Finance Channel

Source: Copyright 2012 dpa Deutsche Presse-Agentur GmbH

Story Tools Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters