• Switzerland edition
 
UBS pays steep price as Libor scandal deepens
UBS CEO Sergio Ermotti: "Unacceptable". Photo: UBS

UBS pays steep price as Libor scandal deepens

Published: 19 Dec 2012 21:30 GMT+01:00
Updated: 19 Dec 2012 21:30 GMT+01:00

The investigations by Swiss, British and US regulators revealed evidence of massive misconduct in the setting of the Libor rate, a global reference that
affects products from student loans to mortgages.
 
 Two former UBS traders were also charged with conspiracy by US authorities.

UBS said that the settlement, equivalent to almost 1.2 billion euros, would likely push it into a net loss of between 2.0-2.5 billion francs ($2.2-$2.7 billion) in the fourth quarter.

The Libor rate is used as a benchmark for global financial contracts worth about $300 trillion, and revelations that it had been rigged have harmed the reputation of the City of London financial centre, though the misconduct is alleged to have occurred elsewhere as well.

"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 would pay £160 million ($260 million) to the UK Financial Services Authority, 59 million francs ($64 million) to the Swiss Financial Market Supervisory Authority (FINMA) and $1.2 billion to the US Department of Justice and the Commodity Futures Trading Commission (CFTC).

The UBS fine is the second biggest to hit a bank, after HSBC paid $1.92 billion earlier this month to US authorities to settle allegations of money
laundering.

UBS will pay more than three times the amount of a settlement reached in June with British bank Barclays, one of the many banks investigated.

Barclays cut a £290-million deal with British and US regulators in June.

US Attorney General Eric Holder said that the Justice Department was filing federal charges of felony fraud against UBS Securities Japan.

Several other banks are reportedly in talks with regulators as well, including Royal Bank of Scotland and Deutsche Bank.
   
RBS has said it expects to pay a fine, which press reports have put at £350 million.

Last week, British regulators made the first three arrests in the scandal, and the United States has now charged two former UBS traders as well.

The implicated individuals in the US were identified as Tom Alexander William Hayes, a 33-year-old Briton and 41-year-old Roger Darin of Switzerland.

"They defrauded the company's counterparties of millions of dollars. And they did so primarily to reap increased profits, and secure bigger bonuses, for themselves," Holder said.

Hayes has also been charged with wire fraud and an antitrust violation.

  'Extensive and widespread misconduct'

UBS was the first bank to reveal problems in the rate-setting process of the Libor, an acronym for London Interbank Offered Rate, which is compiled by selected banks that provide information on the rates they offer to other banks.

Regulators found UBS employees had manipulated the information to benefit the bank's trading position and influence the image of UBS's creditworthiness during the 2007-2008 financial crisis.

Britain's FSA said: "Misconduct was extensive and widespread", while Switzerland's FINMA said: "UBS severely violated . . . proper business conduct."

The FSA found records of more than 2,000 requests to manipulate Libor information, such as some that were discussed by e-mail and via internal communications networks and thus widely known.

It released excerpts, such as one trader asking for a high rate from another called "Superman" and exhorting him to "be a hero today."

The response was: "I'll try mate ... as always."

In another exchange, a trader promises that in exchange for an unchanged rate: "I will fucking do one humongous deal with you . . . Like a 50,000 buck
(dollar) deal."

Switzerland's FINMA said most of the manipulation requests were made by a trader in Tokyo, who contacted employees at other banks and independent brokers to try to influence their Libor submissions.

UBS said its Japanese subsidiary would plead guilty to one count of wire fraud.

The FSA found that at least 45 individuals including senior UBS managers were involved in or aware of the attempts to influence Libor.

The FSA's director of enforcement, Tracey McDermott, said in a statement that UBS had showed "a total disregard for the millions of market participants
around the world who were also affected by Libor."

The Swiss regulator meanwhile said that it found no indication that top UBS executives were aware of the misconduct.

Joe Rundle, head of trading at brokerage ETX Capital, said "this level of careless and excessive risk taking is a major blow for the banking industry" following other scandals and banks needing state bailouts during the financial crisis.

Britain has moved to fix Libor, with the FSA recommending a "complete overhaul" that would strip the British Bankers' Association of its role in setting the rates.

UBS's share price closed with a loss of 0.33 percent, while the Swiss Market Index (SMI) on which it is listed was 0.71 percent higher overall.

Don't miss...X
Left Right

Your comments about this article

Today's headlines
Media executive jailed in latest 'sexting' case
Photo: Junpal Abe

Media executive jailed in latest 'sexting' case

A 57-year-old man who passed himself off as a 12-year-old girl in online chatrooms in order to obtain naked photos of children was sentenced to four and a half years in prison by a Zurich district court on Wednesday. READ  

Swiss bank Lombard Odier reveals profits
Lombard Odier is the second Swiss private bank in a week to publish its profits. Photo: Fabrice Coffrini/AFP

Swiss bank Lombard Odier reveals profits

Swiss private bank Lombard Odier has published its first results since its foundation over two centuries ago, as the ultra-discreet sector puts its books in the spotlight. READ  

Police car kills man lying on Fribourg motorway
The police car was travelling to an altercation in Payerne. Photo: Alain Rouiller

Police car kills man lying on Fribourg motorway

A police car hit and killed a 22-year-old man who was lying in the middle of the A1 motorway near Bussy in the canton of Fribourg in the early hours of Thursday morning. READ  

Swiss pick Swedes as ideal neighbours
Two-thirds of the Swiss surveyed would choose Sweden as their neighbour. Photo: Florian Prischl

Swiss pick Swedes as ideal neighbours

Despite launching a campaign to help Chinese people tell the difference between them, it turns out Switzerland and Sweden feel akin after all. Swiss people would rather have the nation of Ikea and ABBA as their neighbour than any other EU country, according to a new survey. READ  

Wawrinka first seed into US Open third round
Switzerland's Wawrinka battled past Thomaz Bellucci. Photo: Don Emmert/AFP

Wawrinka first seed into US Open third round

Third-seeded Stan Wawrinka bulled his way into the third round of the US Open on Wednesday with a 6-3, 6-4, 3-6, 7-6 (7/1) victory over Thomaz Bellucci to become the first men's seed into the third round. READ  

Switzerland expands Ukraine crisis blacklist
Swiss federal parliament building in Bern. Photo: OFCL

Switzerland expands Ukraine crisis blacklist

Switzerland on Wednesday added 11 names and five banks to its blacklist over the Ukraine crisis in fresh moves to stop the country from being used to avoid EU sanctions against Russia. READ  

Jailed Morsi aide's wife seeks UN help in Egypt
Photo: AFP

Jailed Morsi aide's wife seeks UN help in Egypt

The Canadian wife of an imprisoned former aide to deposed Egyptian president Mohamed Morsi is in Geneva this week seeking UN help to free her husband and end "horrific" rights abuses in Egypt. READ  

Swiss top two officially tapped for Davis Cup
Wawrinka and Federer at past Davis Cup competition. Photo: Fabrice Coffrini/AFP

Swiss top two officially tapped for Davis Cup

Switzerland captain Severin Lüthi will tap the star power of Roger Federer and Stan Wawrinka when the Alpine country faces Italy in next month's Davis Cup, Swiss Tennis announced on Wednesday. READ  

Worldwide damage from natural disasters drops
Swiss Re headquarters in Zurich. Photo: Swiss Re

Worldwide damage from natural disasters drops

Natural disasters caused total economic losses of $41 billion in the first six months of this year, much less than usual, reinsurance group Swiss Re estimated on Wednesday. READ  

Swiss consumer spending falls: report
Vehicle registrations rose but other consumer spending indicators dropped. Photo: AFP

Swiss consumer spending falls: report

Swiss consumer spending and sentiment dropped in July after reaching a six-year high in the previous month, UBS said in a report issued on Wednesday. READ  

RECEIVE OUR NEWSLETTER AND ALERTS
Health
Increase in mountain bike accidents keeps Swiss hospitals busy
National
Swiss policeman belatedly hailed for saving Jews from Holocaust
National
'Suicide tourists' to Switzerland double in three years: study
National
Swiss Post SMS scheme gets stamp of approval after pilot project
Business & Money
American tax evasion crackdown hits Swiss private banks' bottom line
Politics
Woman accuses Swiss politician in nude selfies scandal of lying
National
Villagers in Graubünden valley reject hydro plant to protect vultures
Business & Money
Court rules against appellation for absinthe from Neuchâtel valley
National
Two hundred passengers rescued after landslide derails Swiss train
Travel
Switzerland remains world champion for per capita train travel
Culture
Social media backlash forces Polanski to bow out of Locarno film festival
National
Two policemen identified among three Israelis killed in train crash
Features
Untouched Alps: The Local explores Switzerland's only national park
National
Swiss government secretary tweets nude ‘selfies’ taken at work
International
Swiss couples fined in Ibiza for making love in van without seatbelts
National
Schumacher medical record theft suspect hangs himself in Zurich cell
National
Thousands of motorists drive without permits in Switzerland: report
National
Switzerland celebrates the centennial of national park in Graubünden
National
Animal rights group protests over dead fish throwing at festival
National
Federer forced to tear down kids' play area at Graubünden holiday home
National
Zurich taxis charge world’s most expensive fares: new survey
National
Swiss bus driver charged with careless driving in fatal Norway crash
National
European Union rejects Swiss bid to rejig freedom of movement deal
Latest news from The Local in Austria

More news from Austria at thelocal.at

Latest news from The Local in Germany

More news from Germany at thelocal.de

Latest news from The Local in Denmark

More news from Denmark at thelocal.dk

Latest news from The Local in Spain

More news from Spain at thelocal.es

Latest news from The Local in France

More news from France at thelocal.fr

Latest news from The Local in Italy

More news from Italy at thelocal.it

Latest news from The Local in Norway

More news from Norway at thelocal.no

Latest news from The Local in Sweden

More news from Sweden at thelocal.se

2,054
jobs available