Bloomberg News

UBS Said to Face Fines of More Than $1 Billion on Libor

December 13, 2012

UBS Said to Face Fines of More Than $1 Billion in Libor Probes

UBS's annual general meeting (AGM) in Zurich. Photographer: Gianluca Colla/Bloomberg

UBS AG (UBSN), Switzerland’s biggest bank, may be fined more than $1 billion by U.S. and U.K. regulators for trying to rig global interest rates, more than double the amount levied against Barclays Plc, according to a person familiar with the probe.

The fines from the U.S. Commodity Futures Trading Commission, the U.K. Financial Services Authority and the U.S. Department of Justice may be announced as early as next week, said the person, who asked not to be identified because the information isn’t public. The final figures are still being negotiated and could change, three people familiar with the probes said.

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. Barclays, the U.K.’s second-biggest bank, agreed to pay 290 million pounds ($467 million) in June to resolve the U.S. and U.K. Libor probes.

UBS spokeswoman Karina Byrne in New York declined to comment on the potential penalties. Officials from the CFTC, FSA, Swiss regulator Finma and the DOJ also declined to comment.

The fine will likely be the largest against any bank levied by the U.S. and U.K. authorities in the Libor probes, the person said. The CFTC’s portion of the fine against UBS may exceed the entire fine against Barclays. The fine, which was expected to be announced this week, has been delayed as the DOJ works out a deferred prosecution agreement, one of the people said.

Disgorge Profits

Finma, may also penalize the Zurich-based bank and force it to disgorge profits, one of the people said.

UBS fell 1.1 percent to 15.08 francs in Swiss trading yesterday, after declining as much as 1.9 percent. The stock has gained 36 percent this year.

UBS was fined 29.7 million pounds last month by the FSA and told by the Swiss regulator it may have to increase capital levels for operational risks after a $2.3 billion loss from unauthorized trading by Kweku Adoboli. The former trader in UBS’s London office was sentenced to seven years in jail on Nov. 20 for fraud in relation to the loss, the largest from unauthorized trading in British history.

25 People

More than 25 people left UBS after the lender’s own internal probe into rate manipulation, another person familiar with the matter said last month.

Royal Bank of Scotland Group Plc is in talks to settle with U.S. and U.K. authorities over Libor, a person familiar with the matter said earlier this year. That fine is also expected to be more than that against Barclays and less than that of UBS.

U.K. prosecutors made their first arrests in the criminal Libor investigation on Dec. 11. Thomas Hayes, a former trader at UBS and Citigroup Inc., and two men who worked at the brokerage RP Martin Holdings Ltd. were questioned, people familiar with the case said.

The U.K. Serious Fraud Office, which is conducting a criminal probe in parallel with the U.S. Department of Justice’s fraud division, has focused on e-mails between traders at UBS and other banks.

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 and cooperate.

Adoboli Losses

UBS, the world’s second-largest manager of money for the wealthy, had struggled to map out a strategy for the investment bank since suffering $57 billion in subprime-related losses during the financial crisis. The Adoboli losses led to the departure of Chief Executive Officer Oswald Gruebel, 69, in September 2011 and hastened a review that led to the decision to eliminate 10,000 jobs over three years and dismantle portions of the investment bank.

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. Lenders are asked how much it would cost them to borrow from one another for 15 different periods, from overnight to one year, in currencies including dollars, euros, yen and Swiss francs.

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.

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

To contact the editors responsible for this story: Anthony Aarons at aaarons@bloomberg.net


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