UBS to pay $1.5 billion to settle Libor fixing scandal

UBS is the second bank to reach a settlement with regulators, after Barclays Zurich – Arabstoday Swiss banking giant UBS said on Wednesday it had agreed to pay about $1.5 billion to British, US and Swiss regulators to settle allegations it manipulated Libor interest rates.

The bank said the settlement, equivalent to 1.2 billion Euros, would likely push it into a net loss of between 2 and 2.5 billion Swiss Francs in the fourth quarter.
The Libor rate is a reference point for vast ranges of financial contracts around the world and revelations that it had been rigged have damaged the reputation of the City of London’s financial centre.
"UBS agrees to pay approximately CHF 1.4 billion in fines and disgorgement to US, UK and Swiss authorities to resolve Libor-related investigations," the statement said.
The bank, the biggest in Switzerland, will pay more three times the amount of the settlement reached in June with Britain's Barclays, another one of the more than dozen banks investigated for trying to rig global interest rates.
As part of the one of the biggest fines ever slapped on a financial institution, the Swiss bank said it had agreed to pay £160 million ($260 million) in fines to the UK Financial Services Authority.
It will pay 59 million Swiss Francs ($64 million) as disgorgement, or compensatory penalty, of estimated profits to the Swiss Financial Market Supervisory Authority (FINMA).
It also said it had agreed to payment schedules for a total of $1.2 billion to the US Department of Justice and the Commodity Futures Trading Commission (CFTC).
UBS was the first bank to reveal problems in the rate-setting process of the Libor, an acronym for London Interbank Offered Rate, which estimates the rates at which banks lend money to each other and also affects huge numbers of contracts around the world.
Other banks are also reportedly in advanced talks with regulators about settling allegations that they too manipulated their Libor information, including Royal Bank of Scotland and Deutsche Bank.
"During the course of these investigations, we discovered that the 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.”
FINMA said it had found that "UBS severely violated organisational and proper business conduct."
It found that UBS traders made numerous requests to bank employees to make Libor submissions to benefit UBS's trading position.
FINMA said most of the 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 to a US criminal offence as part of the investigations.
The Swiss regulator said it found no indication that UBS top management was aware of the misconduct, but that "substantial failings" in the bank's internal control processes "prevented the improper interference with interest rates from being discovered and the bank from reacting appropriately."
UBS said that it had cooperated fully with authorities and had taken action to remedy the shortcomings.
Source: AFP