* Settlement could come early in week-sources
* Will be second bank to settle on Libor, more fines loom
* Fine could be as much as $1.6 bln, more than
Barclays’-report
By Steve Slater and Katharina Bart
LONDON/ZURICH, Dec 17 (Reuters) – UBS AG is
expected to be hit with a $1 billion-plus fine to settle charges
of rigging Libor interest rates this week, making it the second
bank to be brought to book for its role in the global scandal.
The fine, to be imposed by regulators in Britain and the
United States, w ould be the latest blow for the Swiss bank that
suffered a rogue trading scandal last year, paid a $780 million
fine to settle a U.S. tax investigation in 2009 and nearly
collapsed in 2008 under the weight of huge subprime losses.
Sources familiar with the matter have told Reuters the fine
will be $1 billion or more, which would be more than double the
$450 million levied on British bank Barclays Plc in
June for interest rate manipulation.
The penalty could be as high as $1.6 billion and UBS will
admit 36 traders around the globe manipulated yen Libor between
2005 and 2010, Swiss newspaper Tages-Anzeiger said, citing
unnamed sources.
UBS declined to comment on the report or on the timing of a
settlement. Reuters could not independently verify the $1.6
billion figure.
“It’s a little bit astonishing from a shareholder
perspective that the fine could be double the amount of
Barclays,” said Peter Stenz, portfolio manager at investment and
pensions manager Swisscanto and a holder of UBS shares.
“The good thing is that it is ended then … The bad thing
is the amount, which raises the question of how important UBS
was in this story,” Stenz said.
While Barclays’ settlement touched off a firestorm that
forced its chairman and chief executive to quit, previous
scandals at UBS have already prompted culls of top bosses as
well a decision to wind down parts of the investment bank that
have tarnished the bank’s name.
Swiss commentators suggested the Libor affair would stiffen
the resolve of UBS top management – all installed after the
period under investigation – to focus on the core business of
wealth management as they trim risky trading activities.
However, the settlement – which sources say is likely to
come sometime this week – could add to global public and
political anger about standards and culture across the industry.
The settlement will be with U.S., British and Swiss
regulators, although the last has no power to fine the bank.
Japanese regulators are also involved, some sources said,
although it was not clear if they would be formally involved in
the penalties.
RATE MANIPULATION
UBS will admit to criminal wrongdoing by its Japanese arm,
where one of its traders manipulated yen Libor and euro yen
contracts, sources familiar with the matter have told Reuters.
UBS declined to comment.
Admitting to criminal wrongdoing can be fatal for a bank, as
it can lose its licence but by admitting to wrongdoing at its
Japanese subsidiary, UBS would be stopping short of admitting to
wrongdoing at a group level.
Individuals are also being targeted. The UBS investigation
centres on former UBS trader Thomas Hayes, but also includes
other UBS bankers, the sources said. Hayes, who joined Citigroup
after leaving UBS in 2009, is one of three British men
arrested last week by London police but later released on bail,
according to a source. Reuters has been unable to contact
Hayes.
More than a dozen banks have been caught in the
international inquiry into Libor rates, with most of the focus
being on how rates were set between 2005 and 2008.
Royal Bank of Scotland is also expected to shortly
reach a settlement on Libor manipulation. The bank will receive
a penalty of more than 350 million pounds ($564 million), the
Sunday Times newspaper reported, without citing sources. RBS
declined to comment.
Libor benchmarks are used to help price trillions of dollars
worth of loans around the world, ranging from home loans and
credit cards to complex derivatives.
Tiny shifts in the rates, compiled from daily polls of
bankers, could benefit any given bank by millions of dollars.
But every dollar a bank benefits could mean an equal loss by
another bank, hedge fund or investor on the other side of the
trade – raising the threat of a raft of civil lawsuits.
Barclays in June admitted it improperly took its own trading
positions into account when reporting interest rates used to
calculate the Libor benchmark, touching off a firestorm that
forced its chairman and chief executive to quit.
At UBS, Libor is the latest in a series of serious problems
that have damaged its reputation. In 2009, UBS paid $780 million
to settle a U.S. investigation into tax issues, while former
London-based trader Kweku Adoboli was convicted last month over
a $2.3 billion rogue trading fraud.
Reuters’ parent company Thomson Reuters Corp
collects information from banks and uses it to calculate Libor
rates according to specifications drawn up by the British
Bankers Association (BBA).
