UBS AG (UBSN) said it’s reviewing its precious metals business amid regulatory inquiries into the gold market, while the Hong Kong Monetary Authority reprimanded the firm for interest-rate rigging.
UBS’s internal review of foreign-exchange trading includes precious metals, Switzerland’s biggest bank said in its annual report released today. Separately, the HKMA said UBS traders tried to rig Hong Kong’s benchmark rate and asked the lender to take action against the employees involved.
Global scrutiny of benchmarks is shifting from interest rates to the currency and commodity markets. At least a dozen regulators are probing allegations that traders colluded to rig benchmarks in the $5.3 trillion-a-day currency market. The Bank of Canada is examining the way its own reference rate for the Canadian dollar is set, according to documents obtained by Bloomberg News.
“Precious metals is a niche market though it’s part of what UBS considers value-added for its wealth management clients,” said Andreas Venditti, an analyst at Vontobel Holding AG in Zurich with a buy recommendation on the stock.
UBS fell as much as 4 percent and were 2.9 percent lower at 17.84 Swiss francs by 4:56 p.m. in Zurich trading. The shares have gained 5.4 percent this year, valuing the bank at 68.5 billion francs ($78.6 billion).
Chief Executive Officer Sergio Ermotti, who scaled back the firm’s investment bank in favor of wealth management, last month said that making predictions on when and how much UBS may be able to provision for legal matters is “difficult.”
Authorities around the world, already investigating the manipulation of benchmarks from interest rates to foreign exchange, are also examining the gold market for signs of wrongdoing.
German financial markets regulator Bafin interviewed Deutsche Bank AG (DBK) employees as part of a probe into the potential manipulation of gold and silver prices. Britain’s Financial Conduct Authority is also scrutinizing how prices are calculated.
Leading industry firms, including UBS, Goldman Sachs Group (GS:US) Inc., Credit Suisse Group AG (CSGN) and JPMorgan Chase & Co. (JPM:US) each generate less than $200 million in annual trading revenue from precious metals, according to data compiled by research company Tricumen Ltd.
UBS, which saved itself billions of euros in fines in December by disclosing to the European Union its role in manipulating the London interbank offered rate, tried to rig the Hong Kong Interbank Offered Rate between 2006 and 2009, the HKMA said today.
The investigation found about 100 internal chat messages containing “change requests” by several traders. The regulator asked UBS to take disciplinary action against the employees responsible and no fines will be imposed.
UBS ceased to be a Hibor reference bank in October 2010 and no longer makes submissions, HKMA said today.
“We are pleased that the investigation of the HKMA returned the same results as our own internal investigation -- no collusion among banks and no noticeable impact on the fixing of Hibor,” Rob Stewart, a Hong Kong-based spokesman for UBS, said in an e-mail. The bank had “taken appropriate steps to incorporate the HKMA’s suggested improvements,” he said.
In December 2012, UBS was ordered to pay $1.5 billion by regulators in Switzerland, the U.S. and the U.K. for trying to rig global interest rates, including Libor.
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