ZURICH (Reuters) - UBS UBSN.VX said it has taken “swift action” to review how it trades foreign exchange as part of a global probe into alleged rate rigging in the $5.3 trillion-a-day foreign exchange market.
Chief Executive Sergio Ermotti told journalists his bank had moved quickly to launch an internal investigation of its forex operations and was cooperating with regulators conducting their own probe, in a third quarter earnings call on Tuesday.
He did not give any further details.
Several countries have now opened investigations into suspected price manipulation amid media reports that traders have manipulated some fixings - snapshots of where currencies are trading at a particular time in the market - which are used to price trillions of dollars worth of investments.
UBS shares were trading down more than 6 percent by 1017 GMT following news that the Swiss regulator FINMA had imposed a temporary 50 percent increase in the amount of capital the bank holds against risk weighted assets, to cover potential costs of unknown legal probes.
Asked whether FINMA’s move was linked to the ongoing foreign exchange investigation, Ermotti said there was no indication the top-up was related to a single item but rather it was an assessment based on UBS’s entire portfolio.
The uncertainty surrounding possible rate manipulation raises painful memories for UBS and its shareholders. It was one of the first financial institutions rapped for its role in the rigging of the global interest rate benchmark known as Libor.
Earlier UBS told investors it had taken and would continue to take “appropriate” action in respect to staff as a result of the ongoing review of its forex trading, without elaborating.
Switzerland’s financial market regulator FINMA said earlier this month it was investigating several Swiss banks for possible wrongdoing. It did not name the banks under scrutiny but said multiple banks around the world were potentially implicated.
Earlier this month, the chairman of cross-town rival Credit Suisse CSGN.VX said his bank had not found any evidence of malpractice in the FX market following inquiries from regulators.
The most popular benchmark is the WM/Reuters “fix”, set at 4 pm London time, using actual trades and order rates from Thomson Reuters and rivals such as EBS during a 1 minute “fix” period. WM, a unit of State Street, calculates the benchmark using the median of the trades and the orders.
Thomson Reuters is the parent company of Reuters News, which is not involved in the rate fixing process.
Reporting By Katharina Bart, writing by Caroline Copley and Sinead Cruise in London; editing by Patrick Graham