UBS fined record £940m after traders boasted of rigging interest rates

 
A UBS logo is seen outside a building in central London December 10, 2007. The dollar retreated from an earlier one-month high versus the yen on Monday after a $10 billion subprime writedown by UBS fanned concerns about the health of the global financial sector. REUTERS/Alessia Pierdomenico
REUTERS
Nick Goodway19 December 2012

The City of London’s tattered reputation suffered another massive blow today when one of its biggest banks was hit with a record £940 million fine for rigging interest rates.

Swiss-owned UBS admitted “inappropriate and unethical behaviour” by dozens of its highly paid traders and executives over six years.

A “shocking” report by the City watchdog the Financial Services Authority today revealed an endemic culture of “total disregard” for the millions of people worldwide who trusted the benchmark Libor rate.

The penalty dwarfs the £290 million paid by Barclays in June when the scandal first broke.

The FSA report found how corrupt UBS traders openly discussed in chat forums and group emails how to fix Libor to the bank’s advantage between 2005 and 2010 — but five internal audits failed to pick it up.

The fine includes a record £160 million by the FSA, £740 million by the US Department of Justice and the Commodities Futures Trading

Commission, and £40 million by the Swiss Financial Market Supervisory Authority.

The penalties are far higher than those imposed on Barclays because UBS’s misconduct was “considerably more serious” and “more widespread within the bank”, the FSA said.

It has been a dreadful year for Swiss-based UBS, with the jailing of London-based rogue trader Kweku Adoboli and a £29.7 million FSA fine last month for lax controls. The bank, which employs 6,500 in London and bought respected homegrown City investment bank, Warburgs, in 1995, is axing 10,000 staff around the world. The regulator said at least 45 senior managers, traders and Libor-rate submitters at UBS were involved in rate fixing, and up to 70 more people knew what was going on.

More than 2,000 requests for rates to be manipulated — of Libor and its Japanese and euro equivalents — were documented, with an “unquantifiable number” of verbal requests. Tracey McDermott, FSA director of enforcement and financial crime, said: “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.”

Libor is the underlying benchmark interest rate used for some £300 trillion of contracts, from mortgages to complex financial instruments. Up to 20 financial institutions are under investigation by global regulators, with the FSA still looking at a further six.

UBS chief executive Sergio Ermotti said about 40 people have left the bank over Libor fixing. He told staff today: “No amount of profit is more important than safeguarding the good name of our firm. We deeply regret this inappropriate and unethical behaviour.”

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