How UBS manipulated interest rates


Swiss bank UBS has been fined $1.5 billion by British, Swiss and U.S. regulators to settle charges of manipulating global benchmark interest rates.

UBS said on Wednesday it will pay $1.2 billion to the U.S. Department of Justice and the Commodity Futures Trading Commission, 160 million pounds ($260 million) to Britain's Financial Services Authority (FSA) and 59 million Swiss francs ($65 million) to Swiss regulator Finma.

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A panel of banks submit daily estimates of the interest rates at which they think they could borrow money on the open market.

The FSA said UBS had routinely sought to manipulate submissions to calculate benchmark rates, known as the London Interbank Offered Rate (Libor) and the Euro Interbank Offered Rate and (Euribor), to make its trading positions more profitable and give the appearance the bank was on a stronger financial footing as the financial crisis began unfolding in 2007.

Below are highlights explaining UBS's misconduct, from the FSA's final notice.

Moreover, attempts to manipulate Libor and Euribor submissions to benefit trading positions were often discussed in open chat forums and in group emails, which included at least a further 70 individuals at UBS.

Four UBS traders did so by colluding with interdealer brokers, and one UBS trader in particular also colluded directly with individuals at banks on the rates panel.

Nine of the wash trades made between September 2008 and August 2009 generated more than 170,000 pounds fees to reward one broker for helping UBS.

The trader also asked brokers to manipulate their screens, to disseminate false information about prevailing market cash rates, and to make false bids and offers on cash trades in the market to skew perceptions of the rates at which cash could be borrowed or lent in the interbank market.

More than 115 internal requests were made at UBS in connection to other Libor currencies and Euribor.

From June 2008 to at least December 2008, these directives were meant to influence UBS's Libor submissions to ensure they did not attract negative media comment about creditworthiness.

Even this did not stop traders from persisting with internal requests, however. Five internal audits failed to spot the rigging.

($1 = 0.6155 pound = 0.9133 Swiss franc)

(Reporting by Sarah White; Editing by Erica Billingham)