UBS faces $1 billion fine for Libor rigging

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Swiss bank UBS is expected to pay about $1 billion to settle charges of rigging Libor interest rate benchmark.  (Reuters) Swiss bank UBS is expected to pay about $1 billion to settle charges of rigging Libor interest rate benchmark. (Reuters)
SummarySwiss bank UBS is expected to pay about $1 billion to settle charges of rigging Libor interest rate.

Swiss bank UBS is expected to pay about $1 billion to settle charges of rigging the Libor interest rate benchmark, according to a person familiar with the situation, making it the second major bank to be officially ensnared by the global scandal.

The announcement could come as early as Monday, this person said.

Such a penalty, more than double the $450 million fine levied on British bank Barclays in June for related conduct, indicates the scope of the misconduct by UBS could dwarf that exposed by Barclays' settlement.

Barclays in June admitted it improperly took trading positions into account when reporting interest rates used to calculate the Libor benchmark, touching off a firestorm that forced its chairman and chief executive to quit.

The settlement also prompted a political and public backlash against standards in banking across Europe and the United States.

The Libor benchmarks are used for trillions of dollars worth of loans around the world. Tiny shifts in the rate, compiled from daily polls of bankers, could benefit dealers in complex products.

While details in the Barclays settlement showed traders brazenly gaming the system, the expected size of the UBS settlement indicates that Barclays may prove to be far from the worst offender and that other settlements may also be larger than Barclays'. Overall, more than a dozen banks have been caught in the international inquiry.

UBS declined to comment. The agencies expected to be involved in the settlement, including Britain's Financial Services Authority and the U.S. Department of Justice and the Commodity Futures Trading Commission all declined to comment.

UBS has said it set aside 6.5 billion swiss francs ($7.04 billion) in reserves, but has not broken out how those funds are earmarked.

CONDITIONAL LENIENCY

The steep fine that UBS has agreed to pay is a surprise because the bank, since 2011, has cooperated with law-enforcement agencies in their probes, according to regulatory filings and court documents.

The bank disclosed it received conditional immunity from the Justice Department's antitrust division and other international competition authorities, which suggests the bank's $1 billion payout could have been higher without that leniency.

Some clues to UBS's alleged central role in the Libor conspiracy were included in documents filed earlier this year by the Canadian Competition Bureau, which investigates anti-competitive activity.

The documents describe how a "cooperating party" tried to artificially move yen Libor. UBS is the cooperating bank,

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