UBS Deal to Pay PS940m for Fraud and Bribery

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Byline: BANKING Holly Williams

FRAUD, bribery and rate-rigging in the banking industry were laid bare yesterday as Swiss bank UBS agreed a PS940m settlement with regulators in another damning day for the sector.

Britain's financial regulator said attempts at UBS to manipulate Libor interbank lending rates were extensive and widespread, while it found traders were openly bribing and colluding with external brokers.

The fine, which includes a record PS160m penalty from the UK's Financial Services Authority (FSA), marks the biggest yet from the industry's Liborrigging scandal and is far larger than the total of PS290m paid by Barclays for Libor manipulation this summer.

It also comes just a week after HSBC agreed a US$1.9bn (PS1.2bn) settlement with US prosecutors over allegations that it allowed rogue states and drug cartels to launder billions of pounds through its American arm.

UBS agreed the settlement with regulators in the UK, US and Switzerland after admitting fraud in its Japanese arm and corrupt payments to brokers as it sought to manipulate Libor rates to flatter its own financial strength and reputation.

Libor is the umbrella term for benchmark rates that underpin the terms of US$500tn of contracts from mortgages to the cost of corporate lending.

The FSA said the misconduct was rife throughout the bank between 2005 and the end of 2010, as UBS traders routinely made requests to colleagues responsible for determining Libor and Euribor submissions in an effort to benefit their own trading positions.

It said that at least 45 individuals, including traders, managers and senior managers, were involved in, or aware of, the practice.

The regulator recorded at least 2,000 requests for inappropriate submissions and said many more would have been made verbally.

Misconduct at the bank was so routine during the five-year period that every Libor and Euribor submission was at risk of having been manipulated, according to the FSA.

The FSA said misconduct at UBS was all the more serious as it had attempted to manipulate Libor submissions at other banks, making corrupt payments to reward brokers for their efforts. The bank set up unnecessary trades, known as "wash trades", to bribe brokers for their help, which saw one broker firm make PS170,000 in illicit fees.

UBS also made corrupt payments of PS15,000 a quarter to another broker firm over at least 18 months. …