GENEVA -- Switzerland's UBS AG agreed Wednesday to pay some $1.5
billion in fines to international regulators following a probe into the
rigging of a key global interest rate.
In admitting to fraud,
Switzerland's largest bank became the second bank, after Britain's
Barclays PLC, to settle over the rate-rigging scandal. The fine, which
will be paid to authorities in the U.S., Britain and Switzerland, also
comes just over a week after HSBC PLC agreed to pay nearly $2 billion
for alleged money laundering.
The settlement caps a tough year for
UBS and the reputation of the global banking industry. As well as being
ensnared in the industry-wide investigation into alleged manipulations
of the benchmark LIBOR interest rate, short for London interbank offered
rate, UBS has seen its reputation suffer in a London trial into a
multibillion dollar trading scandal and ongoing tax evasion probes.
a result of the fines, litigation, unwinding of real estate
investments, restructuring and other costs, UBS said it expects to make a
fourth quarter net loss of between 2 billion to 2.5 billion Swiss
francs ($2.2-2.7 billion). Nevertheless, the Zurich-based bank
maintained that it "remains one of the best capitalized banks in the
Other banks are expected to be fined for their involvement
in the LIBOR scandal. LIBOR, which is a self-policing system and relies
on information that global banks submit to a British banking authority,
is important because it is used to set the interest rates on trillions
of dollars in contracts around the world, including mortgages and credit
UBS characterized the probes as "industry-wide
investigations into the setting of certain benchmark rates across a
range of currencies."
The UBS penalty is more than triple the $450
million in fines imposed by American and British regulators in June on
Barclays for submitting false information between 2005 and 2009 to
manipulate the LIBOR rates. Those fines exposed a scandal that led to
the departure of Chief Executive Bob Diamond and the announcement that
Chairman Marcus Agius would step down at the end of the year.
accepting the fines, UBS said some of its employees tried to rig the
LIBOR rate in several currencies, but that its 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.
UBS said some of
its personnel had "engaged in efforts to manipulate submissions for
certain benchmark rates to benefit trading positions" and that some
employees had "colluded with employees at other banks and cash brokers
to influence certain benchmark rates to benefit their trading
UBS added that "inappropriate directions" had been
submitted that were "in part motivated by a desire to avoid unfair and
negative market and media perceptions during the financial crisis."
financial regulator called the misconduct by UBS "extensive and broad"
with the rate-fixing carried out from UBS offices in London and Zurich.
desks were responsible for different rate submissions. At least 2,000
requests for inappropriate submissions were documented - an
unquantifiable number of oral requests, which by their nature would not
be documented, were also made, the U.K.'s Financial Services Authority
"Manipulation was also discussed in internal open chat
forums and group emails, and was widely known," the FSA said. "At least
45 individuals including traders, managers and senior managers were
involved in, or aware of, the practice of attempting to influence
Sergio Ermotti, who was appointed CEO of UBS AG in
November 2012 in the wake of a major trading scandal, said the
misconduct does not reflect the bank's values or standards.
deeply regret this inappropriate and unethical behavior. No amount of
profit is more important than the reputation of the firm, and we are
committed to doing business with integrity," he said.
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.
Along with Credit Suisse, the
second-largest Swiss bank, UBS is on the list of the 29 "global
systemically important banks" that the Basel, Switzerland-based Bank for
International Settlements, the central bank for central banks,
considers too big to fail.
It's not the first time that UBS has
fallen afoul of regulators. Notably in 2009, U.S. authorities fined UBS
$780 million in 2009 for helping U.S. citizens avoid paying taxes.
U.S. government has since been pushing Switzerland to loosen its rules
on banking secrecy and has been trying to shed its image as a tax haven,
signing deals with the United States, Germany and Britain to provide
greater assistance to foreign tax authorities seeking information on
their citizens' accounts.
In April, Ermotti called Switzerland's
tax disputes with the United States and some European nations "an
economic war" putting thousands of jobs at risk.
And in September
2011 the bank announced more than $2 billion in losses and blamed a
32-year-old rogue trader, Kweku Adoboli, at its London office for
Britain's biggest-ever fraud at a bank.
regulator fined UBS, saying its internal controls were inadequate to
prevent Adoboli, a relatively inexperienced trader, from making vast and
risky bets. Adoboli has been sentenced to seven years in prison.