UBS pays $1.5 billion over rate rigging


Swiss banking giant UBS said Wednesday it had agreed to pay about $1.5 billion to British, U.S. and Swiss regulators to settle allegations it manipulated Libor interest rates.

The bank said it the settlement would likely push into a net loss of between 2 billion and 2.5 billion Swiss francs ($2.2 billion to $2.7 billion) in the fourth quarter.

“UBS agrees to pay approximately 1.4 billion (Swiss francs) in fines and disgorgement to U.S., U.K. and Swiss authorities to resolve Libor-related investigations,” the statement said.

The bank, Switzerland’s biggest, will pay more three times the amount of the settlement reached in June with Britain’s Barclays, another one of the more than dozen banks investigated for trying to rig global interest rates.

As part of the one of the biggest fines ever slapped on a financial institution, the Swiss bank said it had agreed to pay £160 million ($260 million) in fines to the U.K. Financial Services Authority.

It will pay 59 million Swiss francs ($64 million) as disgorgement, or compensatory penalty, of estimated profits to the Swiss Financial Market Supervisory Authority (FINMA).

It also said it had agreed to payment schedules for a total of $1.2 billion to the U.S. Department of Justice and the Commodity Futures Trading Commission.

UBS was the first bank to reveal problems in the rate-setting process of the Libor, an acronym for London Interbank Offered Rate, which estimates the rates at which banks lend money to each other and also affects huge numbers of contracts around the world.

FINMA said it had found that “UBS severely violated organizational and proper business conduct.”

It found that UBS traders made numerous requests to bank employees to make Libor submissions to benefit UBS’s trading position.

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

UBS said its Japanese subsidiary would plead guilty to a U.S. criminal offense as part of the investigations.

“As part of a proposed agreement with the U.S. Department of Justice, UBS Securities Japan Co. Ltd. has agreed to enter a plea to one count of wire fraud relating to the manipulation of certain benchmark interest rates, including Yen Libor,” it said.

FINMA also found that during the 2007-08 financial crisis “UBS managers inappropriately gave guidance to those employees charged with submitting interest rates, the purpose being to positively influence the perception of UBS’s creditworthiness.”