The board of directors of UBS has authorised settlements with the US Department of Justice and Commodity Futures Trading Commission in connection with their investigations of benchmark interest rates.
The proposed settlement with the CFTC is subject to the Commission’s approval.
UBS has reached a settlement with the UK Financial Services Authority (FSA) concerning its investigation. The Swiss Financial Market Supervisory Authority (FINMA) will also issue an order concluding its formal proceedings with respect to UBS.
UBS agrees to pay a total of approximately CHF1.4bn in fines and disgorgement. UBS will pay GBP160m in fines to the FSA and CHF59m as disgorgement of estimated profits to FINMA. The board has authorised a payment of fines totalling USD1.2bn to the Department of Justice and CFTC. These monies would be paid according to specified payment schedules.
The conduct described in the settlements includes the following:
• Certain UBS personnel engaged in efforts to manipulate submissions for certain benchmark rates to benefit trading positions;
• Certain employees at the bank colluded with employees at other banks and cash brokers to influence certain benchmark rates to benefit their trading positions; and
• Certain personnel gave 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.
The conduct encompassed by the settlements includes Yen LIBOR, GBP LIBOR, CHF LIBOR, Euro LIBOR, USD LIBOR, Euribor and Euroyen TIBOR, although the nature and extent of the conduct in question varied significantly from one currency to another.
The board of UBS Securities Japan (UBSSJ) has authorised UBSSJ to enter a plea to one count of wire fraud relating to the manipulation of certain benchmark interest rates, including Yen LIBOR. The board of UBS AG has authorised the firm to enter into a Non-Prosecution Agreement (NPA) with DoJ relating to UBS AG and all of its subsidiaries and affiliates, except for UBSSJ.
These resolutions stem from industry-wide investigations into the setting of certain benchmark rates across a range of currencies. These investigations have focused on whether there were improper attempts by banks, either acting on their own or with others, to manipulate Libor and other benchmark rates at certain times.
UBS has fully cooperated with the authorities in their investigations and significantly enhanced its control framework for its submissions process for Libor and other benchmark interest rates. The investigations by other governmental authorities and private litigation referred to in our third quarter 2012 report remain ongoing notwithstanding today’s announcements.
UBS chief executive Sergio Ermotti says: “During the course of these investigations, we discovered behaviour of certain employees that is unacceptable. Their misconduct does not reflect the values of UBS nor the high ethical standards to which we hold every employee. We have cooperated fully with the authorities and taken decisive and appropriate actions to correct the issues and to strengthen our control processes and procedures. We deeply regret this inappropriate and unethical behaviour. No amount of profit is more important than the reputation of this firm, and we are committed to doing business with integrity.”