UBS to pay $1.5 billion over rate-rigging scandal

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GENEVA — Swiss bank UBS agreed Wednesday to pay $1.5 billion in fines for trying to manipulate a key interest rate that affects borrowers around the world.

The settlement with U.S., British and Swiss regulators caps a tough year for the company and the reputation of the global banking industry. The fine on UBS, which will also see two former traders charged with conspiracy, is triple the amount that British bank Barclays PLC agreed to pay in June to settle similar charges.

It comes a week after HSBC agreed to pay nearly $2 billion to settle allegations of laundering money for Mexican drug cartels and countries under U.S. embargoes, such as Iran.

UBS, Switzerland’s largest bank, said some of its employees tried to rig the LIBOR rate – short for London Interbank Offered Rate – in several currencies.

The rate is set daily using information that banks provide and is used to price trillions of dollars in contracts around the world, including mortgages and credit cards.

Some UBS traders voluntarily submitted – or pressured others to submit – inaccurate data to gain some financial advantage.

The bank’s Japan unit, where much of the manipulation took place, entered a plea to one count of wire fraud in an agreement with the U.S. Justice Department.

The Justice Department said two former UBS senior traders, Tom Alexander William Hayes, 33, of Britain, and Roger Darin, 41, of Switzerland, will be charged with conspiracy, while Hayes also will be charged with wire fraud in New York federal court.

Justice Department officials said they believed the two men were in Britain and Switzerland, and would be seeking their extradition.

UBS will pay $1.2 billion of its fine to the Justice Department and U.S. Commodity Futures Trading Commission. The CFTC will get $700 million, the largest fine it ever ordered. The remaining $300 million will go to regulators in Britain and Switzerland.

As a result of the fines, litigation, unwinding of real estate investments, restructuring and other costs, UBS said it expects to lose between 2 billion and 2.5 billion Swiss francs ($2.2 billion to $2.7 billion) in the fourth quarter.

UBS shares closed down 0.3 percent at 15.20 francs on the Zurich exchange.

The LIBOR scandal is likely to make headlines again in coming months. Other big global banks are also being investigated for rigging the same market and are expected to be fined.

In an interview with Swiss TV, CEO Sergio Ermotti said the bank fired 36 employees involved in the scandal over the past 18 months and learned some clear lessons from it – mainly that “we had to strengthen our controls.”

With more than 2.2 trillion Swiss francs ($2.4 trillion) in invested assets, UBS is one of the world’s largest managers of private wealth assets. At last count, the bank had 63,745 employees in 57 countries and said it aims for a headcount of 54,000 in 2015.


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