Swiss bank UBS warns of penalties as forex settlement talks begin

Mon Sep 29, 2014 7:30am EDT
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By Joshua Franklin

ZURICH (Reuters) - Switzerland's largest bank UBS warned it faced new fines after confirming it was holding talks to settle allegations it was involved in rigging foreign exchange rates.

Authorities from around the world are investigating allegations that dealers at major banks colluded and manipulated key reference rates in the $5.3 trillion-a-day foreign currency market, the world's biggest and least regulated.

UBS has started settlement talks with some of the investigating authorities, the bank said in a share-swap prospectus published on Monday. The terms proposed in the talks included findings that UBS did not have adequate controls over its foreign exchange business, it said.

UBS said it could face "material monetary penalties" in any deal struck. The foreign exchange probe is one of several legal headaches facing the bank as it shrinks its investment banking business.

It raised its provision against future litigation to 1.98 billion Swiss francs ($2.08 billion) earlier this year but has warned this might not be enough to cover possible fines and charges.

UBS did not identify the regulators it was talking to but sources told Reuters on Friday that Britain's Financial Conduct Authority (FCA) was talking to UBS and five other banks - Barclays, HSBC, Royal Bank of Scotland, JP Morgan and Citi - about a possible settlement that could results in each bank being fined hundreds of millions of pounds.

UBS said in its prospectus that other authorities could start settlement talks "in the near future".

The U.S. authorities, which traditionally levy far higher fines than their British counterparts, are not part of the UK negotiations.   Continued...

Raindrops cover the logo of Swiss bank UBS at an office building in Zurich July 29, 2014.  REUTERS/Arnd Wiegmann