UBS Fined Over LIBOR Scandal

The days when a banker’s word was sacrosanct are long gone as anybody who follows the financial news is only too aware. The latest major bank to fall from grace is Swiss bank UBS which has got itself embroiled in the Libor scandal. UBS, Switzerland’s largest bank, had itself been seen as a victim of its own rouge trader, Kweku Adoboli, who was convicted of fraud over £1.4 billion of (allegedly) unauthorised trades.

In this instance, the boot is on the other foot and UBS has been fined £940 million by authorities in the USA, UK and Switzerland for unfairly influencing Libor. Libor stands for the London Interbank Offered Rate and is a critical value which influences trillions of dollars in loans, mortgages and contracts around the world. Libor is intended to be a rate based on the average interest rates that a basket of banks is charging for loans between themselves, but as we now know, some of these banks have been manipulating the rate for their own benefit. The scandal broke when it was revealed that Barclays had manipulated the rate in order to advantage their traders and to provide the impression that the bank had easier access to funds during the worst of the global financial crisis than it did. This helped to maintain the price of Barclays’ shares, of course. The fine that Barclays had to pay was roughly a third of that slapped on UBS.

The Financial Services Authority (FSA, UK) revealed that USB staff in Tokyo made corrupt payments to brokers to enlist their help in the Libor manipulation. FSA said misconduct was widespread at the bank involving at least 45 staff. UBS management told staff to underestimate borrowing costs at the height of the financial crisis in order to maintain market confidence.

According to UBS chief executive, Sergio Ermotti; “We deeply regret this inappropriate and unethical behaviour. No amount of profit is more important than the reputation of this firm, and we are committed to doing business with integrity.” That is easily said once the cat is out of the bag, of course.