(Replaces ninth paragraph to give detail on sum set aside for
litigation, regulatory and similar matters, replacing detail on
a broader measure of reserves.)
* Fine expected to land early next week -source
* Penalty would be more than twice that on Barclays
* More bad news for UBS after rogue trading, job cuts
By Huw Jones
LONDON, Dec 13 Swiss bank UBS is
expected to pay about $1 billion to settle charges of rigging
the Libor interest rate benchmark, according to a person
familiar with the situation, making it the second major bank to
be officially ensnared by the global scandal.
The announcement could come as early as Monday, this person
Such a penalty, more than double the $450 million fine
levied on British bank Barclays in June for related
conduct, indicates the scope of the misconduct by UBS could
dwarf that exposed by Barclays' settlement.
Barclays in June admitted it improperly took trading
positions into account when reporting interest rates used to
calculate the Libor benchmark, touching off a firestorm that
forced its chairman and chief executive to quit.
The settlement also prompted a political and public backlash
against standards in banking across Europe and the United
The Libor benchmarks are used for trillions of dollars worth
of loans around the world. Tiny shifts in the rate, compiled
from daily polls of bankers, could benefit dealers in complex
While details in the Barclays settlement showed traders
brazenly gaming the system, the expected size of the UBS
settlement indicates that Barclays may prove to be far from the
worst offender and that other settlements may also be larger
than Barclays'. Overall, more than a dozen banks have been
caught in the international inquiry.
UBS declined to comment. The agencies expected to be
involved in the settlement, including Britain's Financial
Services Authority and the U.S. Department of Justice and the
Commodity Futures Trading Commission all declined to comment.
UBS said in its third quarter results that on Sept. 30 it
had 897 million Swiss francs ($971 million) set aside for
litigation, regulatory and similar matters, up from 454 million
The steep fine that UBS has agreed to pay is a surprise
because the bank, since 2011, has cooperated with
law-enforcement agencies in their probes, according to
regulatory filings and court documents.
The bank disclosed it received conditional immunity from the
Justice Department's antitrust division and other international
competition authorities, which suggests the bank's $1 billion
payout could have been higher without that leniency.
Some clues to UBS's alleged central role in the Libor
conspiracy were included in documents filed earlier this year by
the Canadian Competition Bureau, which investigates
The documents describe how a "cooperating party" tried to
artificially move yen Libor. UBS is the cooperating bank, people
familiar with the situation have said.
Those documents allege that a trader at the bank - called
"Trader A" - contacted traders at four other banks. On one
occasion, "Trader A" instructed a trader at another bank on what
Libor submission to make.
It is unclear if UBS will resolve the Canadian probe as part
of the imminent settlement.
Authorities are also investigating the actions of
individuals. This week British police and anti-fraud officers
made the first arrests in connection to the Libor probe,
detaining a former trader and two other men, sources said.
One of those arrested was former UBS and Citigroup
trader Thomas Hayes, according to a source familiar with the
situation. The two others worked at interdealer broker RP
Martin, according to a separate source.
TORRID TIME FOR UBS
The fine will mark another blow to UBS, which has had a
tough 18 months after suffering a $2.3-billion loss in a rogue
trading scandal, management upheaval and thousands of job cuts.
"I'm not sure how much more reputational damage can be done
to UBS," said Chris Wheeler, analyst at Mediobanca in London.
"They are rebuilding that slowly, but it won't help the wealth
management business when you see this as a headline."
Banks are keen to put such fines behind them as they attempt
to rebuild credibility among politicians, the general public and
investors following the financial crisis which forced taxpayers
to bail out the banking system.
But the fresh spate of probes and settlements are putting
banks' malpractice back to the forefront.
HSBC on Tuesday reached a $1.92 billion settlement
with U.S. authorities over money laundering, the highest ever
fine on a bank, a day after another London-based bank, Standard
Chartered, agreed to pay $327 million for violating
U.S. sanctions against Iran, Sudan and other states, adding to
an earlier $340 million it paid in a related case.
Deutsche Bank, Germany's flagship lender, was
raided on Wednesday by about 500 German tax inspectors and
police, who arrested five staff in a probe linked to a tax scam
involving the trading of carbon permits.
Britain's Royal Bank of Scotland is also expected to
reach a settlement on Libor manipulation shortly.
Investigators are assessing whether banks used responses to
the daily survey of the rates they would offer to other banks to
try to nudge Libor, perhaps by only a few hundredths of a
percentage point. Such a move could still benefit their own
trades in bonds or more complex deals linked to that rate.
Banks found guilty also face civil lawsuits from those they
traded with. Some borrowers complain they paid more interest
than they should have, although others may have paid less.
Reuters' parent company Thomson Reuters Corp collects
information from banks and uses it to calculate Libor rates
according to specifications drawn up by the British Bankers
($1 = 0.9234 Swiss franc)
(Additional reporting by Steve Slater in London, Martin de
Sa'Pinto in Zurich and Aruna Viswanatha in Washington and
Carrick Mollenkamp in New York; Editing by Alexander Smith,
Alastair Macdonald and Andrew Hay)