Swiss bank UBS agreed Wednesday [19 Dec 2012] to pay $1.5 billion in fines for trying to manipulate a key interest rate that affects borrowers around the world.<\/i><\/p>\n
The settlement with U.S., British and Swiss regulators caps a tough year for the company and the reputation of the global banking industry. The fine on UBS, which will also see two former traders charged with conspiracy, is triple the amount that British bank Barclays PLC agreed to pay in June to settle similar charges.<\/p>\n
And it comes a week after HSBC agreed to pay nearly $2 billion to settle allegations of laundering money for Mexican drug cartels and countries under U.S. embargoes, such as Iran.<\/p>\n
UBS, Switzerland\u2019s largest bank, said some of its employees tried to rig the LIBOR rate \u2014 short for London Interbank Offered Rate \u2014 in several currencies. The rate is set daily using information that banks provide and is used to price trillions of dollars in contracts around the world, including mortgages and credit cards.<\/p>\n
Some UBS traders voluntarily submitted \u2014 or pressured others to submit \u2014 inaccurate data to gain some financial advantage.<\/p>\n
The bank\u2019s Japan unit, where much of the manipulation took place, entered a plea to one count of wire fraud in an agreement with the U.S. Justice Department.<\/p>\n
The Justice Department said two former UBS senior traders, Tom Alexander William Hayes, 33, of Britain, and Roger Darin, 41, of Switzerland, will be charged with conspiracy, while Hayes also will be charged with wire fraud in New York federal court. Justice Department officials said they believed the two men were in Britain and Switzerland, and would be seeking their extradition.<\/p>\n
UBS will pay $1.2 billion of its fine to the Justice Department and U.S. Commodity Futures Trading Commission. The CFTC will get $700 million, the largest fine it ever ordered. The remaining $300 million will go to regulators in Britain and Switzerland.<\/p>\n
As a result of the fines, litigation, unwinding of real estate investments, restructuring and other costs, UBS said it expects to lose between 2 billion and 2.5 billion Swiss francs ($2.2 billion to $2.7 billion) in the fourth quarter. Nevertheless, the Zurich-based bank maintained that it \u201cremains one of the best capitalized banks in the world.\u201d<\/p>\n
UBS shares closed down 0.3 percent at 15.20 francs on the Zurich exchange.<\/p>\n
The LIBOR scandal is likely to make headlines again in coming months. Other big global banks are also being investigated for rigging the same market and are expected to be fined.<\/p>\n
UBS said some of its personnel had \u201cengaged in efforts to manipulate submissions for certain benchmark rates to benefit trading positions\u201d and that some employees had \u201ccolluded with employees at other banks and cash brokers to influence certain benchmark rates to benefit their trading positions.\u201d<\/p>\n
Britain\u2019s financial regulator called the misconduct by UBS \u201cextensive and broad,\u201d with the rate-fixing carried out from UBS offices in London and Zurich.<\/p>\n
Different desks were responsible for different rate submissions. At least 2,000 requests for inappropriate submissions were documented. An unquantifiable number of oral requests were also made, the U.K.\u2019s Financial Services Authority said.<\/p>\n