Top UBS Executives Testify in Britain on Rate-Rigging

By Scott, Mark | International Herald Tribune, January 11, 2013 | Go to article overview

Top UBS Executives Testify in Britain on Rate-Rigging


Scott, Mark, International Herald Tribune


During a hearing Wednesday, British legislators asked why the illegal activity, conducted over six years through 2010, had not been discovered earlier.

Senior executives of UBS, the Swiss banking giant, have faced tough questioning from British politicians about a rate-rigging scandal that led the company to pay $1.5 billion in fines to the global authorities.

During almost three hours of testimony Wednesday, Andrea Orcel, chief executive of UBS's investment bank, and the firm's chief risk and compliance officers were asked why the illegal activity, conducted over six years through 2010, had not been discovered earlier.

"This scandal which took place at UBS was a shocker of enormous proportions," said Andrew Tyrie, a legislator who heads the British Parliament's Commission on Banking Standards, which is investigating misconduct in the country's financial services sector.

The fines were levied last month after British, Swiss and U.S. regulators discovered that about 40 UBS employees had manipulated key benchmark interest rates to portray the bank as being in a healthier financial position than it actually was.

UBS's Japanese subsidiary pleaded guilty to fraud charges in the case, which included the manipulation of the London interbank offered rate, or Libor, and the Euro interbank offered rate, or Euribor. Together, the rates underpin trillions of dollars of financial products worldwide, including sophisticated derivatives and home mortgages.

In the United States, the Justice Department has brought charges against two former UBS traders, Thomas Hayes and Roger Darin, over their roles in the illegal activity.

"These are industrywide problems," said Mr. Orcel, a deal- making veteran who has advised on some the biggest banking takeovers in Europe and who joined UBS last year from Bank of America. "We all got probably too arrogant, too self-convinced that things were correct the way they were. I think the industry needs to change."

Mr. Orcel helped broker the $97 billion acquisition of the Dutch bank ABN Amro in 2007 by a consortium of banks led by Royal Bank of Scotland. The mistimed deal played a role in R.B.S.'s being bailed out by the British government during the financial crisis.

Mr. Orcel, whom one British legislator referred to as the "Ronaldo of investment banking" -- a reference to Cristiano Ronaldo, the Portuguese soccer star -- was asked by lawmakers whether he still would have supported the ABN Amro deal.

"Knowing what we know now, we would have advised them not to proceed," Mr. Orcel said.

The British lawmakers peppered Mr. Orcel; Philip J. Lofts, UBS's chief risk officer; and the firm's global head of compliance, Andrew Williams, with questions about why the illegal activity had not been discovered despite several internal audits of the bank's trading activity.

The UBS executives acknowledged that only 18 of the 40 individuals linked to the scandal had been fired because of the illegal activity, though some of the implicated traders had moved to other banks before the misconduct was detected. …

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