UBS to admit Japan criminal wrongdoing in Libor case: sources

Fri Dec 14, 2012 5:24pm EST
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By Katharina Bart and Huw Jones

ZURICH/LONDON (Reuters) - UBS UBSN.VX 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 activity.

A settlement would make it the second major bank after Britain's Barclays (BARC.L: Quote) to be sanctioned for its role in the global scandal.

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 products.

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 behavior.

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 specter 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.   Continued...

Signs are seen on the outside of Swiss bank UBS in central London November 20, 2012. REUTERS/Luke MacGregor