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October 4th, 2013 
Awake Goy
UBS has agreed to pay $1.5 billion in fines over its involvement in Libor and Euribor manipulation.
It will pay £160 million to the UK’s Financial Services Authority (FSA) and $1.2 billion to the US Department of Justice (DoJ) and Commodity Futures Trading Commission (CFTC). The bank will also pay Sfr59 million to the Swiss Financial Market Supervisory Authority.
UBS’s Japanese unit has also agreed to enter a guilty plea to one charge of wire fraud, relating to the manipulation of certain benchmark interest rates, including yen Libor.
The fine imposed by the FSA is its largest to date. It found individuals at UBS manipulated Libor and Euribor between January 1, 2005 and December 31, 2010 to improve the profitability of trading positions.
At least 45 individuals, including traders, managers and senior managers, were involved in, or aware of, the practice of attempting to influence submissions, the FSA found.
Four of its traders also colluded with interdealer brokers to influence yen Libor submissions made by panel banks. Illicit fees of more than £170,000 were paid to the brokers. On September 18, 2008, a trader explained to a broker: “If you keep 6s [that is, the six-month yen Libor rate] unchanged today… I will do one humongous… deal with you… like a 50,000 buck deal, whatever… I need you to keep it as low as possible… if you do that… I’ll pay you, you know, $50,000, $100,000… whatever you want… I’m a man of my word.”
It is understood that disciplinary action, including dismissals, has been taken against the individuals involved, but UBS has not officially announced any dismissals. Sergio Ermotti, UBS’s chief executive, said: “We deeply regret this inappropriate and unethical behaviour. No amount of profit is more important than the reputation of this firm, and we are committed to doing business with integrity.”
Internal control failures meant the widespread manipulation was not detected. Between 2005 and 2008, UBS had no systems, controls or policies governing the procedure for making Libor submissions, according to the FSA. Reviews of the systems in 2008 and 2009 were also found to have been inadequate. At no point from 2005 to 2010 did the bank have any systems, controls or policies at all governing Euribor submission.
“Even when the [Libor] trading and submitting roles were split in autumn 2009, UBS’s systems and controls did not prevent traders from camouflaging their requests as ‘market colour’,” the FSA noted.
It also comes after UBS announced in October plans to fire 10,000 staff and wind down its fixed-income business.
The FSA, meanwhile, is continuing to pursue a number of cross-border investigations in relation to Libor and Euribor. Earlier this year, Barclays agreed to pay a total $450 million penalty for market manipulation to the DoJ, the FSA and the CFTC.
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