UBS is to pay out $1.5bn in fines after it admitted its role in fixing the interbank lending rate.
The Swiss bank has agreed a settlement with UK, US and Swiss regulators for a total of £940m, following “extensive and widespread” moves to manipulate LIBOR and EURIBOR.
Of this fine, £160m will be paid to the Financial Services Authority, the largest ever penalty it has imposed.
Some $1.2bn (£740m) in combined fines will go to the US Department of Justice (DoJ) and the Commodities Futures Trading Commission, and CHF 59m (£40m) to the Swiiss Financial Market Supervisory Authority.
UBS said it is likely to make a loss of CHF 2bn-2.5bn in the fourth quarter as a result of making provisions for litigation and other regulatory issues, giving it a pre-tax profit of CHF2.5bn-3bn for the year.
Barclays was previously fined £290m for its role in rigging LIBOR, of which just under £60m went to the City watchdog.
The FSA said UBS’ misconduct took place for a number of year and in several countries. It said UBS traders routinely made request to other members of staff involved in LIBOR to set the rate in order to benefit the traders’ positions. Corrupt brokerage payments were made to reward brokers for their efforts to manipulate the LIBOR submissions of panel banks, it added.
It said between 2005 and 2010, at least 2,000 requests for inappropriate submissions were documented – an unquantifiable number of oral requests, which by their nature would not be documented, were also made.
Manipulation was also discussed in internal open chat forums and group emails, and was widely known. At least 45 individuals including traders, managers and senior managers were involved in, or aware of, the practice of attempting to influence submissions.
The FSA said internal audits by the compliance department at UBS failed to pick up any sign of the “routine and widespread manipulation of the submissions”.
“Even when the trading and submitting roles were split in autumn 2009, UBS’ systems and controls did not prevent traders from camouflaging their requests as “market colour”,” said the regulator.
It found every LIBOR and EURIBOR submission, in currencies in which UBS traded during the relevant period was at risk of having been improperly influenced to benefit derivatives trading positions.
Tracey McDermott, FSA director of enforcement and financial crime, said: “The findings we have set out in our notice today do not make for pretty reading. The integrity of benchmarks such as LIBOR and EURIBOR are of fundamental importance to both UK and international financial markets.
UBS traders and managers ignored this. “They manipulated UBS’ submissions in order to benefit their own positions and to protect UBS’ reputation, showing a total disregard for the millions of market participants around the world who were also affected by LIBOR and EURIBOR.
“There should be no doubt about how seriously the FSA views these failings. This is our largest penalty to date and demonstrates our commitment to ensuring that those in the wholesale markets do not put their own interests above those of the markets as a whole.”
UBS CEO Sergio Ermotti said the bank regrets the unethical behaviour of some traders. “During the course of these investigations, we discovered behavior of certain employees that is unacceptable. Their misconduct does not reflect the values of UBS nor the high ethical standards to which we hold every employee.
"We have cooperated fully with the authorities and taken decisive and appropriate actions to correct the issues and to strengthen our control processes and procedures. We deeply regret this inappropriate and unethical behavior. No amount of profit is more important than the reputation of this firm, and we are committed to doing business with integrity.”
The FSA said it continues to pursue a number of other significant cross-border investigations in relation to LIBOR and EURIBOR.
UBS did not qualify for the full 30% discount available for early settlement under the FSA’s settlement discount scheme (known as “Stage One”). Because settlement was reached in the second phase of the discount scheme (known as “Stage Two”), UBS received a reduced discount of 20%. Without the discount the fine would have been £200m.
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Biggest fine of its type ever issued