Bloomberg News

UBS Said to Be Close to a Settlement Over Libor-Rigging

December 03, 2012

UBS Near $450 Million Settlement on Rate Rigging

Regulators claim UBS traders colluded with other banks to influence rates in an effort to increase profits. Photographer: Chris Ratcliffe/Bloomberg

UBS AG (UBSN), Switzerland’s biggest lender, is close to agreements with U.S. and U.K. regulators to pay more than 290 million pounds ($466 million) in fines over allegations traders tried to rig global interest rates, a person with knowledge of the talks said.

An announcement may come as soon as next week, said the person, who declined to be identified because the talks are private. More than 25 people have already left UBS after the lender’s own internal probe, another person said last month.

Global authorities are investigating claims that more than a dozen banks altered submissions used to set benchmarks such as the London interbank offered rate to profit from bets on interest-rate derivatives or make the lenders’ finances appear healthier. UBS’s fine may surpass the record 290 million pounds Barclays Plc (BARC), the U.K.’s second-biggest bank, paid in June to settle claims it attempted to manipulate Libor.

“UBS has been cooperating fully with the regulatory and enforcement authorities in connection with Libor investigations,” Mark Panday, a Hong Kong-based spokesman at the Zurich-based lender, said in an e-mail. “As we are in the midst of discussions with those authorities, we cannot comment further.”

U.K. Prosecutors

Regulators are focusing on whether UBS traders colluded with other banks to influence rates in an effort to increase profit, the person said. U.S. authorities want to seal a deal with the Zurich-based bank by the end of the month, though the discussions could continue into next year or break down, according to the New York Times, which reported the discussions earlier today citing unidentified officials.

Steve Adamske, a spokesman for the Commodity Futures Trading Commission, and officials at the U.K. Financial Services Authority declined to comment on the New York Times report. The U.S. Justice Department also declined to comment, according to the newspaper.

U.K. prosecutors are poised to arrest former traders and rate setters at UBS for questioning over their role in the Libor scandal, a person with knowledge of the probe said last month. The Serious Fraud Office, which is conducting a criminal probe in parallel with the DOJ’s fraud division, is focusing on e- mails between traders at UBS and other banks.

HSBC, JPMorgan

David Green, the director of the SFO, has said the agency is considering levying conspiracy-to-defraud charges against individuals. The agency, which doesn’t have the power to arrest people, has brought in the City of London Police for help, he said.

UBS has received conditional immunity from antitrust authorities including the Canadian Competition Bureau, the Swiss Competition Commission and the DOJ, for being among the first companies to report their own wrongdoing. Barclays was the first to report to the CFTC and FSA.

UBS was granted a “first in marker” with the Canadian agency on Jan. 5, 2010, according to court documents filed in the Ontario Superior Court in May 2011 that didn’t name the bank. Over a series of eight meetings, lawyers for UBS gave the regulator details of its own internal probe. Based on its disclosures, the Canadian regulator alleged HSBC Holdings Plc (HSBA), Royal Bank of Scotland Group Plc, Deutsche Bank AG (DBK), JPMorgan Chase & Co. (JPM), Citigroup, and brokers ICAP Plc (IAP) and RP Martin Holdings Ltd. colluded to manipulate the Yen Libor rate.

Conditional Immunity

Libor, a benchmark for more than $300 trillion of financial products worldwide, is derived from a survey of banks conducted each day on behalf of the British Bankers’ Association in London. The rates help determine borrowing costs for everything from mortgages to student loans.

Lenders aren’t supposed to know each other’s submissions until the rates are released. By doing so, the traders affected all interest-rate derivatives that use Yen Libor as the basis for their price, the Canadian regulator said. In an interest- rate swap, banks make or lose money depending on the floating interest rate, usually tied to Libor.

The Swiss antitrust regulator granted UBS conditional immunity in its investigation into manipulation of the Yen Libor, Tibor and Swiss franc Libor rates. The DOJ granted similar immunity as part of its probes into Yen Libor and Euroyen Tibor.

So far, only Japanese regulators have punished UBS over the interest-rate probe. In December 2011, Japan’s FSA ordered the UBS Securities Japan division to suspend trading in derivatives transactions related to Yen Libor and Euroyen Tibor from Jan. 10 to 16. The regulator found that the securities unit had “serious problems” in its internal controls and ordered it to develop a new compliance program.

UBS is one of the first banks to have disclosed the investigation. In its 2010 annual report published in early 2011, the bank said it had received subpoenas from the U.S. Securities and Exchange Commission, the CFTC and the DOJ, and an order to provide information from the Japan Financial Supervisory Agency.

The bank said the investigations focused “on whether there were improper attempts by UBS, either acting on its own or together with others, to manipulate Libor rates at certain times.”

To contact the reporter on this story: Lindsay Fortado in London at lfortado@bloomberg.net

To contact the editors responsible for this story: Edward Evans at eevans3@bloomberg.net; Chitra Somayaji at csomayaji@bloomberg.net; Christopher Scinta at cscinta@bloomberg.net


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