£940m fine for UBS

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“No amount of profit is more important than the reputation of this firm, and we are committed to doing business with integrity,” says chief executive Sergio Ermotti

The Swiss banking giant is to pay £940m in settlement of charges of fraud, manipulating Libor and paying bribes to brokers.  It includes a £160m payment to the FSA.  The penalty is the largest ever imposed on a bank by the FSA, being more than three times the £290m fine levied on Barclays in June.

The FSA said that at least 45 people were involved in, or were aware of, the rigging and that the breaches happened over the period between January 2005 and December 2010, as personnel engaged in “efforts to manipulate submissions for seven benchmark rates to benefit trading positions.”  Some bank employees colluded with other banks’ employees and cash brokers to influence benchmark rates, and UBS’s Japanese arm has agreed to enter a plea to one count of wire fraud which relates to the same manipulation, including Yen Libor.

The FSA says that the misconduct was “extensive”, with at least 2,000 documented requests for inappropriate submissions and an “unquantifiable” number of oral requests, showing a “total disregard for proper standards by these traders and brokers” who referred to each other in “congratulatory and exhortatory terms such as “the three muscateers” [sic], “superman” and “be a hero today”.  In one egregious example, the FSA quotes a UBS trader saying “if you keep 6s [the six-month Yen Libor rate] unchanged today … I will [expletive] do one humungous deal with you …like a 50,000 buck deal, whatever … I need you to keep it as low as possible …if you do that … I’ll pay you, you know, 50,000 dollars, 100,000 dollars … whatever you want … I’m a man of my word.”

It was also revealed that UBS made “corrupt payments” of £15,000 per quarter to brokers, rewarding them for helping UBS to manipulate interest rates.

Tracey McDermott, FSA director of enforcement and financial crime, said that the findings set out in the FSA’s notice “do not make pretty reading”.  She added that the “integrity of benchmarks such as Libor and Euribor are of fundamental importance to UK and international financial markets.  UBS traders and managers ignored this.  They manipulated UBS’s submissions in order to benefit their own positions and to protect UBS’s reputation, showing a total disregard for the millions of market participants around the world who were also affected by Libor and Euribor.”

The former City minister Lord Myners, told the Radio 4 programme that the fine is “peanuts” to UBS and called for a fundamental change in bank leadership and or banks to be “broken up.”

 

 

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