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UBS to plead guilty on Libor, fined by Fed in currency probe

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UBS Group AG said its main unit will plead guilty to fraud in the US for manipulating benchmark interest rates and pay US$203 million in fresh fines after the Swiss bank violated an agreement that had allowed it to avoid prosecution.

[ZURICH] UBS Group AG said its main unit will plead guilty to fraud in the US for manipulating benchmark interest rates and pay US$203 million in fresh fines after the Swiss bank violated an agreement that had allowed it to avoid prosecution.

UBS received conditional immunity in a related US antitrust probe into currency rigging, the bank said in statement Wednesday, avoiding more fines as a reward for cooperating with authorities. However it will pay US$342 million to the Federal Reserve and undertake remedial measures in connection with foreign exchange misconduct.

The currency investigation led the US Justice Department to scrap a 2012 non-prosecution agreement with UBS that was designed to settle an earlier probe into the rigging of the London interbank offered rate, or Libor. The deal was conditional on the bank not committing further US crimes during the next two years. The foreign exchange probe began less than a year later.

It's the first time the Justice Department has scrapped a non-prosecution agreement in the banking industry and signals its determination to crack down on repeat offenders.

UBS is the first of five global banks expected to announce settlements Wednesday with US authorities over allegations of manipulating foreign exchange rates, people with knowledge of the discussions have said.

Citigroup Inc, JPMorgan Chase & Co, Barclays Plc and Royal Bank of Scotland Group Plc will probably enter pleas related to antitrust violations, the people said.

The Libor and currency probes were two of the biggest legal threats UBS faced as it scales back activities in investment banking, the business that led prosecutors to its doorstep. The additional US$203 million fine brings UBS's bill to about US$1.7 billion in the Libor case. UBS has already paid about US$800 million to US, UK and Swiss regulators over its role in rigging foreign exchange rates.

The Justice Department has come under criticism in recent years for the deferred- and non-prosecution agreements it has reached with banks, with lawmakers and other critics saying the deals weren't an adequate deterrent. The government counters that the agreements lead to oversight and cooperation that otherwise wouldn't be possible.

BLOOMBERG