Daily News: December 19, 2012

UBS Announces Record $1.5B LIBOR Settlement

UBS announced that its board of directors has authorized the payment of $1.5 billion in fines and disgorgement to U.S., UK and Swiss authorities to resolve LIBOR-related investigations.

As part of a proposed agreement with the U.S. Department of Justice, UBS Securities Japan (UBSSJ) has agreed to enter a plea to one count of wire fraud relating to the manipulation of certain benchmark interest rates, including Yen LIBOR.

UBS said the conduct described in the settlements included the following:

  • Certain UBS personnel engaged in efforts to manipulate submissions for certain benchmark rates to benefit trading positions;

  • Certain employees at the bank colluded with employees at other banks and cash brokers to influence certain benchmark rates to benefit their trading positions; and

  • Certain personnel gave inappropriate directions to UBS submitters that were in part motivated by a desire to avoid unfair and negative market and media perceptions during the financial crisis.

    The conduct encompassed by the settlements includes Yen LIBOR, GBP LIBOR, CHF LIBOR, Euro LIBOR, USD LIBOR, Euribor and Euroyen TIBOR, although the nature and extent of the conduct in question varied significantly from one currency to another.

    In a related story, the New York Times Deal Book said the cash penalties represented the largest fines to date related to the rate-rigging inquiry. The Times noted that the fallout from the UBS case is expected to ratchet up the pressure on some of the world’s largest financial institutions and spur settlement talks across the banking industry.

    UBS CEO Sergio Ermotti said: “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.”

    To read the UBS news release, click here.

    To read the related NYT Deal Book article, click here.

    For a related Reuters timeline of how the LIBOR scandal unfolded, click here.