Swiss bank UBS fined $1.5 bln for Libor fraud

UBS has been fined $1.5 billion by British, Swiss and
US regulators to settle charges of manipulating global
benchmark interest rates. REUTERS photo

GENEVA - The Associated Press

Switzerland’s UBS AG agrees to pay a $1.5 billion fine to international regulators following a probe into the rigging of a key global interest rate

Swiss banking giant UBS AG admitted yesterday to fraud and agreed to pay some $1.5 billion to U.S., British and Swiss authorities in a probe into the rigging of global benchmark interest rates.

The settlement caps a tough year for Switzerland’s biggest bank, which is one of several leading banks that has been under investigation over allegations of manipulating the benchmark LIBOR interest rate, short for London interbank offered rate. It is used to set the interest rates on trillions of dollars in contracts around the world, including mortgages and credit cards.

The rate is a self-policing system and relies on information that global banks submit to a British banking authority. American and British regulators have already fined Britain’s Barclays $453 million for submitting false information between 2005 and 2009 to keep the interest rate low.

UBS said some of its employees tried to rig the LIBOR rate in several currencies, but that its Japan unit, where much of the manipulation took place, entered a plea to one count of wire fraud in a the proposed agreement with the U.S. Justice Department.

The statement from the UBS board of directors said some of its personnel had “engaged in efforts to manipulate submissions for certain benchmark rates to benefit trading positions.”

‘Misconduct did not reflect bank’s values’

The bank also said some of its employees had “colluded with employees at other banks and cash brokers to influence certain benchmark rates to benefit their trading positions” or had given “inappropriate directions to UBS submitters that were in part motivated by a desire to avoid unfair and negative market and media perceptions during the financial crisis.”

Sergio Ermotti, who was appointed chief executive officer of UBS AG in November 2012 in the wake of a major trading scandal, said in the statement that the misconduct did not reflect the bank’s values or standards.

“We deeply regret this inappropriate and unethical behavior. No amount of profit is more important than the reputation of the firm, and we are committed to doing business with integrity,” he said.

With more than $2.4 trillion in invested assets, Zurich-based UBS is one of the world’s largest managers of private wealth assets. At last count, the bank had 63,745 employees in 57 countries but said it aimed for a headcount of 54,000 in 2015. Along with Credit Suisse, the second-largest Swiss bank, UBS is on the list of the 29 “global systemically important banks” that the Basel, Switzerland-based Bank for International Settlements, the central bank for central banks, considers too big to fail.

In 2008, UBS was forced to seek a bailout from the Swiss government when it was hard hit by the financial crisis and its fixed-income unit had more than $50 billion in losses. U.S. authorities fined UBS $780 million in 2009 for helping U.S. citizens avoid paying taxes.

The U.S. government has since been pushing Switzerland to loosen its rules on banking secrecy and has been trying to shed its image as a tax haven, signing deals with the United States, Germany and Britain to provide greater assistance to foreign tax authorities seeking information on their citizens’ accounts.