Categorized | Civil Justice Update

UBS settles Libor-fixing probe with US, UK, Switzerland for $1.5 billion

The Wall Street Journal (12/19, Enrich, Revill, Subscription Publication, 2.29M) reports that UBS AG has reached a settlement with US, UK and Swiss authorities over allegations that the bank manipulated the Libor benchmark interest rate. Under the terms of the settlement, UBS will pay about $1.5 billion to several countries.

        Reuters (12/19, Bart, Miles) reports that the penalty is more than three times the $450 fine paid by the UK bank Barclays in June over Libor rigging allegations. Reuters notes that UBS will pay $1.2 billion to the Justice Department and the Commodity Futures Trading Commission, 160 million pounds to the UK’s Financial Services Authority, and 59 million Swiss francs to the Swiss regulator Finma.

        Bloomberg News (12/19, Logutenkova, Fortado, 1M) reports that “the bank’s unit in Japan agreed to enter a plea to one count of wire fraud in relation to the manipulation of benchmark interest rates including yen Libor.” Bloomberg notes, “authorities are investigating claims that more than a dozen banks altered submissions used to set benchmarks such as the London interbank offered rate to profit from bets on interest-rate derivatives or make the lenders’ finances appear healthier.”

        The AP (12/19, Heilprin) reports from Geneva, “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. As 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 world.'”

        The New York Times (12/19, Scott, Protess, Subscription Publication, 1.68M) reports, “In a sign that officials are increasingly taking a hard line against financial wrongdoing, the Justice Department also secured a guilty plea from the bank’s Japanese subsidiary, sending a warning shot to other big banks suspected of rate rigging. The UBS subsidiary, which agreed to plead to a single count of wire fraud, is the first unit of a big bank to agree to criminal charges in more than a decade. The severity of the UBS penalties, authorities said, reflected the extent of the problems. The government complaints laid bare a scheme that spanned from 2005 to 2010, describing how the bank reported false rates to squeeze out extra profits and deflect concerns about its health during the financial crisis.”

        The Financial Times (12/19, Shotter, Masters, Subscription Publication, 448K) also reports on the settlement.

        Geithner was tipped off about potential LIBOR abuses in May 2008. The Financial Times (12/19, Nasiripour, Subscription Publication, 448K), in an article titled, “Geithner Was Told Of Libor Fears In 2008,” reports that Treasury Secretary Geithner was informed of allegations that the LIBOR rate was being manipulated by traders in May of 2008, while he was serving as the New York Fed president. According to the Times, it has never before been reported that Geithner was aware of the charges at such an early

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