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Friday 11 July 2014

UBS hit with $1.5bn fine after admitting manipulation of benchmark rates

Published 20/12/2012|05:00

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Swiss bank UBS was hit with a $1.5bn (€1.13bn) fine yesterday, admitting to fraud, paying bribes to brokers and "pervasive" manipulation of global benchmark interest rates by dozens of staff in a deal with international authorities.

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The penalty agreed with US, UK and Swiss regulators is more than three times the $450m fine levied on Britain's Barclays in June, also for rigging the Libor benchmark rate used to price financial contracts around the globe.

It is the second-largest fine paid by a bank and comes a week after Britain's HSBC agreed to pay the biggest ever penalty – $1.92bn – to settle a probe in the United States into laundering money for drug cartels.

The revelations are another blow to UBS, which has had a tough 18 months after suffering a $2.3bn loss in a rogue trading scandal, management upheaval and thousands of job cuts.

"We deeply regret this inappropriate and unethical behaviour. No amount of profit is more important than the reputation of this firm, and we are committed to doing business with integrity," UBS chief executive Sergio Ermotti said in a statement disclosing the extent of the wrongdoing, which took place over six years from 2005 to 2010.

UBS said it will pay $1.2bn to the US Department of Justice (DoJ) and the Commodity Futures Trading Commission (CFTC), £160m (€194m) to the UK's Financial Services Authority and 59 million Swiss francs from its estimated profit to Swiss regulator Finma.

Rigging

The bank said the fines would widen its fourth-quarter net loss but said it would not need to raise new capital as a result and traders said the fines were largely priced into the bank's shares, which were expected to open slightly higher in Zurich.

Britain's financial regulator said that at least 45 people were involved in the rigging across three continents, which took place across a range of Libor currencies.

It involved senior managers at UBS directing traders to keep Libor submissions low to give the impression that the bank was able to borrow more cheaply than it would actually have been able to do so. (Reuters)

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