UBS traders charged, bank fined $1.5 billion in Libor scandal

Wed Dec 19, 2012 6:49pm EST
 

By Katharina Bart and Tom Miles and Aruna Viswanatha

ZURICH/NEW YORK (Reuters) - U.S. prosecutors charged two former UBS traders on Wednesday with taking part in a multi-year scheme to manipulate Libor and other benchmark interest rates, making them the first individuals to be criminally accused in the international scandal.

Earlier on Wednesday, the Swiss bank admitted to fraud and bribery in connection with efforts to rig the interest rates and agreed to pay $1.5 billion in fines to regulators in the United States, UK and Switzerland.

The charges against the two traders, Tom Hayes and Roger Darin, resulted from a broad investigation into the activities of more than a dozen banks in the setting of prices for Libor and related rates.

In settling with U.S., UK and Swiss authorities, UBS not only paid one of the largest fines ever imposed on a bank, its Japanese subsidiary pleaded guilty to one U.S. criminal count of fraud relating to manipulation of benchmark rates, including the yen Libor.

The Japanese subsidiary is where authorities allege much of the manipulation of interest rates occurred, as employees of the bank looked to profit on derivatives trades linked to the rates.

UBS is the second large international bank to reach a settlement with U.S. and UK authorities, and other settlements are expected to follow in the next few months. In June Barclays Plc agreed to pay $453 million in fines to settle allegations its employees attempted to manipulate Libor rates.

The investigation and it findings - that attempts to manipulate Libor were fairly widespread in the banking industry - have cast doubts on the reliability of Libor as a benchmark for setting interest rates. The probe has also raised questions about why bank regulators were slow to uncover the manipulation, which Reuters previously reported dated back to at least the late 1990s.

"The bank's conduct was simply astonishing," Lanny Breuer, who heads the U.S. Justice Department's criminal division, said in announcing the settlement. "Make no mistake - for UBS traders, the manipulation of Libor was about getting rich."   Continued...

 
An employee walks past a logo of Swiss bank UBS in Zurich December 19, 2012. REUTERS/Michael Buholzer