Swiss banking giant UBS AG said yesterday it has admitted to fraud and agreed to pay some US$1.5 billion to US, British and Swiss authorities in a probe into the rigging of global benchmark interest rates.
The settlement caps a tough year for Switzerland’s biggest bank, which is one of several leading banks that has been under investigation over allegations of manipulating the benchmark LIBOR interest rate, short for London interbank offered rate. It is used to set the interest rates on trillions of dollars in contracts around the world, including mortgages and credit cards.
The rate is a self-policing system and relies on information that global banks submit to a British banking authority. US and British regulators have already fined Britain’s Barclays US$453 million for submitting false information between 2005 and 2009 to keep the interest rate low.
UBS said some of its employees tried to rig the LIBOR rate in several currencies, but that its Japan unit, where much of the manipulation took place, entered a plea to one count of wire fraud in a the proposed agreement with the US Justice Department.
The statement from the UBS board of directors said some of its personnel had “engaged in efforts to manipulate submissions for certain benchmark rates to benefit trading positions.”
The bank also said that some of its employees had “colluded with employees at other banks and cash brokers to influence certain benchmark rates to benefit their trading positions” or had given “inappropriate directions to UBS submitters that were in part motivated by a desire to avoid unfair and negative market and media perceptions during the financial crisis.”
Sergio Ermotti, who was appointed chief executive officer of UBS AG last month in the wake of a major trading scandal, said in the statement that the misconduct does not reflect the bank’s values or standards.
“We deeply regret this inappropriate and unethical behavior. No amount of profit is more important than the reputation of the firm, and we are committed to doing business with integrity,” he said.