Swiss banking giant UBS AG (UBS: Quote) announced Wednesday that it has agreed to pay about 1.4 billion Swiss francs or about $1.53 billion in fines and disgorgement to settle LIBOR-related investigations on manipulation of key global benchmark interest rates. UBS expects to report a net loss in its fourth quarter, reflecting provisions for litigation and regulatory matters.
UBS said it has reached a settlement with the UK Financial Services Authority or FSA. At the same time, the Swiss Financial Market Supervisory Authority or FINMA has concluded its proceedings against UBS.
UBS board of directors has authorized settlements with the US Department of Justice or DoJ, and Commodity Futures Trading Commission or CFTC, in connection with the investigations. The proposed settlement with the CFTC is subject to the Commission's approval, UBS noted.
The board has authorized a $1.2 billion payment of fines to the DoJ and CFTC, and expects those authorities to make further announcements later today.
UBS will pay 160 million pounds in fines to the FSA, the largest fine ever imposed by the FSA for significant failings regarding the London Interbank Offered Rate or LIBOR and the Euro Interbank Offered Rate or EURIBOR. The bank will pay nearly 59 million Swiss Francs as disgorgement of estimated profits to FINMA.
LIBOR is the average interest rate that lending banks in London charge when lending to other banks. The rate is considered as a benchmark for finance all around the world. The settlements were based on certain UBS personnel engaging in efforts to manipulate submissions for certain benchmark rates to benefit trading positions.
UBS CEO Sergio Ermotti said, "During the course of these investigations, we discovered behavior of certain employees that is unacceptable...We deeply regret this inappropriate and unethical behavior. No amount of profit is more important than the reputation of this firm, and we are committed to doing business with integrity."
As part of a proposed agreement with the DoJ, UBS Securities Japan Co. Ltd., has agreed to enter a plea to one count of wire fraud relating to the manipulation of certain benchmark interest rates, including Yen LIBOR.
FINMA has concluded that UBS seriously violated Swiss financial market legislation and ordered that measures have to be taken to improve the processes involved. FINMA noted that during the 2007 to 2008 period, UBS managers 'inappropriately gave guidance to those employees charged with submitting interest rates.' FINMA sees that the bank's intention was to positively influence the perception of UBS's creditworthiness.
According to FSA, corrupt brokerage payments were made to reward brokers for their efforts to manipulate the LIBOR submissions of panel banks.
Looking ahead to the fourth quarter, UBS expects net loss attributable to shareholders to be in the range of about 2.0 billion francs to 2.5 billion francs. On an adjusted basis, the company sees full-year pre-tax profit in the range of around 2.5 billion francs to 3.0 billion francs.
UBS said its outlook mainly reflects total provisions for litigation and regulatory matters; restructuring charges; and an own credit loss on financial liabilities designated at fair value.
In October end, UBS had posted a loss for the third quarter, hurt by impairment losses and a charge on its own credit, despite improved profits in all of its business divisions. At that time, it also announced its decision to cut about 10,000 jobs and exit from certain business lines within the Investment Bank, to increase profitability.
In June this year, British banking giant Barclays plc (BCS: Quote,BARC.L) had paid 290 million pounds or $452 million to settle similar allegations.
In Zurich, UBS shares are currently trading at 15.33 francs, up 0.52 percent, on a volume of 1.99 million shares.
In US, UBS ended on Tuesday at $16.76, up 2.57 percent, on a volume of 3.27 million shares.
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by RTT Staff Writer
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