UBS Said to Face $1.6 Billion Libor Penalty This Week

UBS AG (UBSN) is set to pay as much as $1.6 billion to settle claims of Libor manipulation by the U.S. Justice Department, the Commodity Futures Trading Commission, the U.K. Financial Services Authority and the Swiss Financial Market Supervisory Authority, said a person familiar with the probes. 

By Lindsay Fortado and Greg Farrell on December 16, 2012

 

The announcement could come by tomorrow, said the person, who asked not to be identified because they aren’t authorized to speak publicly about the matter. The $1.6 billion figure would be more than three times the 290 million pounds ($469 million) that Barclays Plc (BARC) agreed to pay last June to settle allegations that its employees conspired to manipulate the London interbank offered rate, which is used in bank borrowing.

As part of the case, U.S. prosecutors are planning to file charges against multiple bankers associated with UBS’s rigging of Tokyo interbank lending rates, according to another person with knowledge of the matter. The charges would be the first brought by the Department of Justice against individuals alleged to have manipulated Libor and comparable lending rates in Europe and Japan.

The prosecution is slated to begin in tandem with an announcement that UBS Securities Japan Ltd., the Japanese unit of the Zurich-based bank, would plead guilty to manipulating Japanese interest rates starting in 2007, said the person, who asked not to be named because the matter is private.

No Comment

Christoph Meier, a Zurich-based spokesman for UBS, Liam Parker, a spokesman for the FSA, and Tobias Lux, a spokesman for the Swiss financial markets regulator, declined to comment on the settlement amount.

Karina Byrne, a spokeswoman for UBS, said last week in an e-mail: “We continue to work closely with various regulatory authorities to resolve issues relating to the setting of certain global benchmark interest rates. As we are in active discussions with these authorities, we cannot comment further.”
Unlike the pending settlement with UBS, the Justice Department didn’t require Barclays to enter a guilty plea to a specific charge. In deciding against a charge last June, prosecutors praised Barclays’ “timely, voluntary and complete disclosure of facts.”

UBS has been “granted conditional leniency or conditional immunity” by the Justice Department’s antitrust division, in connection with potential antitrust violations related to submissions for interbank lending rates in Tokyo, according to the Swiss bank’s most recent annual report.

U.S. Guidelines

According to Justice Department guidelines, a corporation can secure favorable treatment from prosecutors if it’s the first to pledge full cooperation in an antitrust investigation. In order to win that leniency, however, the corporation has to include an admission that it was part of an antitrust conspiracy, and help identify other participants in the scheme.

One year ago, Japanese regulators sanctioned UBS’s Japanese operations, curtailing the bank’s ability to participate in the Tokyo interbank derivative market for a week, and ordering the bank to improve its regime of compliance and internal controls.

Last week, a former Citigroup Inc. trader was among three people detained in the first U.K. arrests as part of the global Libor probes, according to two people familiar with the matter.

Thomas Hayes, a former trader at UBS and Citigroup, was arrested by the Serious Fraud Office and City of London Police, said the people, who asked not to be identified citing the continuing investigation.

The other two men arrested worked at brokerage firm RP Martin Holdings Ltd., according to one of the people and a third person familiar with the investigation, who also requested anonymity. The employees are Terry Farr and Jim Gilmour, people with knowledge of the investigation said. They were later released on bail.

To contact the reporters on this story: Lindsay Fortado in London at lfortado@bloomberg.net; Greg Farrell in New York at gregfarrell@bloomberg.net.

To contact the editors responsible for this story: Anthony Aarons at aaarons@bloomberg.net; Michael Hytha at mhytha@bloomberg.net.