UBS falls on $8 billion estimate in FX fine research report

ZURICH/LONDON June 12 Thu Jun 12, 2014 8:27am EDT

ZURICH/LONDON June 12 (Reuters) - UBS shares fell on Thursday following a research report which said the Swiss bank could have to pay $8 billion in fines and settlements relating to alleged collusion and price-manipulation in the global currency market.

The report, published on Wednesday by independent research firm Autonomous Research, said foreign exchange settlements could cost banks a total of $35 billion, almost six times more than the total fines paid in the Libor interest rate-rigging scandal.

Shares in UBS, which declined to comment on the figure in the report, were down 1.9 percent at 1200 GMT, a move traders in Zurich attributed to the Autonomous report.

The report estimates that UBS will pay $8 billion, the biggest fine for any single bank and more than the $6 billion total all banks have so far shelled out for Libor.

Next are the world's two largest foreign exchange trading banks: Deutsche Bank AG with an expected $4.4 billion fine, and Citigroup with $4.3 billion.

Autonomous, a research firm founded in 2009 covering major European and U.S. banks, based its estimates on the size of Libor fines, including those avoided for co-operation. It reckons the total FX fine pool will be at least double the Libor total, but capped at each bank's annual profit level.

"We acknowledge that our methodology is speculative, but it applies the theory that repeated wrongdoing attracts higher penalties, as witnessed elsewhere," the authors said in the report.

Autonomous is an independent research firm covering major U.S. and European banks. It was founded in 2009 by Stuart Graham, formerly head of European banks equity research at Merrill Lynch. The firm's chairman is Lord Myners.

UBS declined to comment on the Autonomous report, but a spokesman pointed to the bank's first-quarter report, where it showed 1.778 billion Swiss francs in provisions to cover all its legal difficulties. Its quarterly report in May showed that overall operational and legal risks could hit the bank's capital base by 3.1 billion francs in the coming 12 months.

Deutsche declined to comment, and Citi was unavailable for immediate comment.

Regulators around the world, including the U.S. Department of Justice and Britain's Financial Conduct Authority, are investigating allegations that senior currency traders shared client order information with each other and attempted to manipulate exchange rates.

Some 40 FX employees at many of the world's biggest banks have been placed on leave, suspended or fired as part of the global investigation - including one employee at the Bank of England - although no individual or institution has been accused of any wrongdoing. (Additional reporting by Ruppert Pretterklieber; Editing by Sophie Walker)

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