UBS fined $1.5 billion for bribing brokers
UBS AG’s $1.5-billion fine for rigging global interest rates expands the scandal to include bribery and highlights the influence of a trader in Tokyo who colluded with other banks to align their submissions.
The employee led efforts to influence Japanese Yen Libor submissions by paying brokers as much as $24,400 a quarter and offering a payment to another for helping him keep that day’s rate low. The banker, only identified by regulators as Trader A, worked at UBS in Tokyo from 2006 to 2009 and directly contacted employees at other banks to influence their submissions at least 80 times.
“I need you to keep it as low as possible,” Trader A wrote to the broker on Sept. 18, 2008, referring to sixmonth Yen Libor. “If you do that ... I’ll pay you, you know, $50,000, $100,000 ... whatever you want ... I’m a man of my word,” according to transcripts released by the U.K. Financial Services Authority Wednesday.
UBS was ordered to pay about $1.5 billion to U.S., U.K. and Swiss regulators for trying to rig global interest rates, including the London interbank offered rate, over a six-year period. Regulators found that traders at the Zurich-based bank made more than 2,000 requests to its own rate submitters, traders at other banks and brokers to manipulate rate submissions through 2010.
The financial penalties are more than triple the $446-million fine Bar
clays PLC agreed to pay in June in the first settlement of Libor-rigging allegations. Barclays chief executive Robert Diamond and chairman Marcus Agius resigned in the face of political outrage over the scandal.
UBS CEO Sergio Ermotti joined the bank in April 2011, after the period covered during the rate-rigging investigations.
“UBS’s misconduct is, although similar in nature, considerably more serious than Barclays’ because it was more widespread within the firm,” the FSA said. “More individuals, including managers and senior managers, participated in or knew about the manipulation.”
UBS shares closed at $16.56, down 1.1. per cent, in New York trading Wednesday.
Libor, a benchmark for more than $300 trillion of financial products worldwide, is derived from a survey of banks conducted each day on behalf of the British Bankers’ Association in London. Lenders are asked how much it would cost them to borrow from one another for 15 different periods, from overnight to one year, in currencies including dollars, euros, yen and francs.
Trader A boasted that he was able to rig the benchmark because he was “mates with the cash desks” at one unnamed bank and that they “always helped each other out,” a transcript of a Feb, 2, 2007 chat showed, according to the FSA.
At least 45 bank employees, including some managers, knew of the “pervasive” practice and a further 70 people were included in open chats and messages where attempts to manipulate Libor and Euribor were discussed, the FSA said.
During the six-year period, four of UBS’s traders, one of whom was a manager, made more than 1,000 writ- ten requests to 11 interdealer brokers at six brokerage firms, asking them to influence other panel banks that contributed to Japanese Yen Libor submissions.
The findings are part of settlements with regulators in three countries over allegations UBS colluded to manipulate Libor and at least five other benchmarks. UBS will pay $1.2 billion in the U.S. and the bank’s unit in Japan agreed to enter a guilty plea to wire fraud for manipulating benchmark interest rates including Yen Libor, UBS said. It was fined $257-million by the FSA and must disgorge $64 million in estimated profits to the Swiss Financial Market Supervisory Authority.
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 a person with knowledge of the matter. The charges would be the first brought by the Justice Department against individuals alleged to have manipulated Libor and comparable benchmarks in Europe and Japan.
U.K. fraud prosecutors opened a criminal probe this year and last week arrested Thomas Hayes, a former trader at UBS, according to people familiar with the matter.
Trader A made more than 450 requests to manipulate Yen Libor submissions in 2007 as he held large trading positions tied to the rate that matured at different times.
“Trader A embarked on a coordinated campaign to influence threemonth Japanese Yen Libor for the benefit of those positions,” the FSA said.
“For this purpose, Trader A made internal requests, broker requests and external requests.”