UBS to pay £940m in fines for rigging lending rates

The bank agreed the settlement after admitting to fraud and corrupt payments to brokers as it sought to manipulate Libor rates to flatter its own financial strength and reputation.

The fine, which includes a record £160m penalty from the UK’s Financial Services Authority (FSA), marks the biggest yet from the industry’s Libor-rigging scandal and is far larger than the total of £290m paid by Barclays for Libor manipulation this summer.

The FSA said the misconduct was rife throughout the bank between 2005 and the end of 2010 as UBS traders routinely made requests to colleagues responsible for determining Libor and Euribor submissions in an effort to benefit their own trading positions.

It said that at least 45 individuals, including traders, managers and senior managers, were involved in, or aware of, the practice. The regulator recorded at least 2,000 requests for inappropriate submissions and said many more would have been made orally.

The FSA said misconduct at UBS was “all the more serious” as it had attempted to manipulate Libor submissions at other banks, making corrupt payments to reward brokers for their efforts. It made corrupt payments of £15,000 a quarter to brokers over at least 18 months, according to the FSA.

Yesterday’s report from the FSA revealed incriminating conversations between UBS traders and brokers, saying they would “play the rules” and “return the favour”.

One trader said: “I need you to keep it (the six-month Japanese Libor rate) as low as possible... if you do that... I’ll pay you, you know, 50,000 dollars, 100,000 dollars... whatever you want... I’m a man of my word.”

Another trader said: “...do your best and i’ll sort u out.”

Bankers referred to each other in congratulatory terms, such as “the three muscateers (sic)”, “Superman” and “Captain caos (sic)”, the FSA added.

UBS chief executive Sergio Ermotti said the group had “taken decisive and appropriate actions” following the probe.

“No amount of profit is more important than the reputation of this firm, and we are committed to doing business with integrity.”

The Libor probe, which has embroiled about 20 financial institutions, has accelerated with the first arrests by the Serious Fraud Office taking place last week.

As well as the FSA, UBS said it had also agreed to pay $1.2bn (£737m) in combined fines to the US Department of Justice and the Commodities Futures Trading Commission, and 59 million Swiss francs (£40m) to UBS’s main Swiss supervisor, the Swiss Financial Market Supervisory Authority.

Meanwhile, two former UBS traders have been charged by US prosecutors in connection with efforts to manipulate the Libor interest rates. Former traders Tom Hayes and Roger Darin have been charged with conspiracy to manipulate the interbank lending rate.