UBS faces $1 billion fine for Libor rigging

Dec 14 2012, 10:38 IST
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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.

people familiar with the situation have said. Those documents allege that a trader at the bank Ė called "Trader A" Ė contacted traders at four other banks. On one occasion, "Trader A" instructed a trader at another bank on what Libor submission to make.

It is unclear if UBS will resolve the Canadian probe as part of the imminent settlement.

Authorities are also investigating the actions of individuals. This week British police and anti-fraud officers made the first arrests in connection to the Libor probe, detaining a former trader and two other men, sources said. One of those arrested was former UBS and Citigroup trader Thomas Hayes, according to a source familiar with the situation. The two others worked at interdealer broker RP Martin, according to a separate source.

TORRID TIME FOR UBS

The fine will mark another blow to UBS, which has had a tough 18 months after suffering a $2.3-billion loss in a rogue trading scandal, management upheaval and thousands of job cuts.

"I'm not sure how much more reputational damage can be done to UBS," said Chris Wheeler, analyst at Mediobanca in London. "They are rebuilding that slowly, but it won't help the wealth management business when you see this as a headline."

Banks are keen to put such fines behind them as they attempt to rebuild credibility among politicians, the general public and investors following the financial crisis which forced taxpayers to bail out the banking system.

But the fresh spate of probes and settlements are putting banks' malpractice back to the forefront.

HSBC on Tuesday reached a $1.92 billion settlement with U.S. authorities over money laundering, the highest ever fine on a bank, a day after another London-based bank, Standard Chartered, agreed to pay $327 million for violating U.S. Sanctions against Iran, Sudan and other states, adding to an earlier $340 million it paid in a related case.

Deutsche Bank, Germany's flagship lender, was raided on Wednesday by about 500 German tax inspectors and police, who arrested five staff in a probe linked to a tax scam involving the trading of carbon permits.

Britain's Royal Bank of Scotland is also expected to reach a settlement on Libor manipulation shortly.

Investigators are assessing whether banks used responses to the daily survey of the rates they would offer to other banks to try to nudge Libor, perhaps by only a few hundredths of a percentage

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