ZURICH/LONDON Dec 14 UBS will admit
to criminal wrongdoing by its Japanese arm, where one of the
Swiss bank's traders manipulated yen Libor and euroyen
contracts, to secure a $1-billion-plus settlement with
regulators, people familiar with the matter said on Friday.
Japan's financial regulator last December ordered UBS's
Japanese securities arm to suspend Tibor- and Libor-related
derivatives trading for a week after a probe found a former
trader attempted to influence the Tokyo interbank offered rate.
UBS, which declined comment, is expected to pay $1 billion
or more as early as Monday to settle the interest rate rigging
charges, the sources said. The UBS settlement could include
manipulation of Libor rates in currencies other than yen, after
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 anti-competitive
A settlement would make it the second major bank after
Britain's Barclays to be sanctioned for its role in the
Libor is the interest rate used as a benchmark for pricing
trillions of dollars worth of financial instruments and
contracts around the globe. Tiny shifts in the rate, compiled
from daily polls of bankers, could benefit dealers in complex
The penalty to be handed down by U.S. and British regulators
is more than double the $450-million fine levied on Barclays in
June for related behaviour.
This could indicate the scope of the misconduct by UBS is
worse than was exposed in the Barclays settlement, which
prompted a public and political backlash about standards and
culture across banking.
The spectre of criminal charges against UBS comes as a blow
to the bank's efforts to focus on its private bank, which caters
to the financial needs of the world's wealthy. UBS is in the
process of pulling out of riskier sectors, including some in
fixed income, in order to reassure customers and shareholders.
The settlement will be with U.S., British and Swiss
regulators, although the last has no power to fine the bank.
Japanese regulators are also involved, some sources said,
although it was not clear if they would be formally involved in
A deal will include the U.S. Department of Justice, the
Commodity Futures Trading Commission (CFTC) and Securities and
Exchange Commission (SEC), Britain's Financial Services
Authority and Switzerland's Finma, sources said. All of these
declined to comment on the expected settlement.
Admitting to criminal wrongdoing can be fatal for a bank, as
it can lose its licence, and authorities are wary of pushing big
banks to the brink. By admitting to the charge against its
Japanese subsidiary, UBS is stopping short of admitting to
wrongdoing at a group level.
The UBS investigation centres on former UBS trader Thomas
Hayes, but also includes other UBS bankers, according to the
Hayes, who joined Citigroup after leaving UBS in 2009,
is one of three British men arrested and later released on bail
by London police on Tuesday, according to a source familiar with
the situation. A lawyer for Hayes could not be
reached on Friday.
Between 25 and 30 people have left UBS as a result of the
Libor rigging, the sources said. The bank had hoped for a softer
touch from regulators by cooperating in industry-wide probes and
was surprised by the size of the expected settlement, they
The criminal probe is not the first in recent UBS history.
In 2009 it settled a messy U.S. investigation into tax evasion
by admitting it had helped wealthy Americans evade and cheat on
And the bank is still recovering from revelations about lax
internal controls when London-based trader Kweku Adoboli was
convicted last month over a $2.3-billion trading fraud.
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