BoE stress tests: all you need to know

The Bank of England has released the results of its latest round of its annual banking stress tests and its semi-annual financial stability report this morning. Used to measure the resilience of a bank’s balance sheet in adverse scenarios, the stress tests measured the impact of a severe slowdown in Chinese growth, a global recession […]

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Draghi: Eurozone will decline without vital productivity growth

It’s productivity, stupid. European Central Bank president Mario Draghi has become the latest major policymaker to warn of the long-term economic damage posed by chronically low productivity growth, as he urged eurozone governments to take action to lift growth and stoke innovation. Speaking in Madrid on Wednesday, Mr Draghi noted that productivity rises in the […]

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Asia markets tentative ahead of Opec meeting

Wednesday 2.30am GMT Overview Markets across Asia were treading cautiously on Wednesday, following mild overnight gains for Wall Street, a weakening of the US dollar and as investors turned their attention to a meeting between Opec members later today. What to watch Oil prices are in focus ahead of Wednesday’s Opec meeting in Vienna. The […]

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Banks, Financial

RBS emerges as biggest failure in tough UK bank stress tests

Royal Bank of Scotland has emerged as the biggest failure in the UK’s annual stress tests, forcing the state-controlled lender to present regulators with a new plan to bolster its capital position by at least £2bn. Barclays and Standard Chartered also failed to meet some of their minimum hurdles in the toughest stress scenario ever […]

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Barclays: life in the old dog yet

Barclays, a former basket case of British banking, is beginning to look inspiringly mediocre. The bank has failed Bank of England stress tests less resoundingly than Royal Bank of Scotland. Investors believe its assets are worth only 10 per cent less than their book value, judging from the share price. Although Barclays’s legal team have […]

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Categorized | Banks, Financial

UBS to pay SFr1.4bn in Libor settlement

Posted on December 19, 2012

UBS has agreed to pay SFr1.4bn ($1.5bn) to US, UK and Swiss regulators as part of a global settlement over allegations that it tried to manipulate Libor interest rates.

The Swiss group will pay $1.2bn to the US Department of Justice and Commodities Futures Trading Commission, and £160m to the UK’s Financial Services Authority. The bank will also disgorge SFr59m in profits to Finma, the Swiss regulator.

    As part of the settlement, UBS’s Japanese unit agreed to enter a plea of one count of wire fraud related to the rigging of various rates, including yen Libor.

    In March 2011, UBS became the first bank to disclose it was under investigation for attempted manipulation of the London Interbank Offered Rate, which is used to price more than $350tn in contracts worldwide.

    The deal announced on Wednesday makes UBS the second bank to settle in the long-running scandal. In June, Barclays agreed to pay £290m to US and UK regulators over its role in the Libor scandal. The resulting furore cost Barclays its chief executive and chairman, and sparked wholesale reform of the way Libor is set.

    The UK penalty levied on UBS is the largest in the history of the FSA and more than double the £59m paid by Barclays.

    Sergio Ermotti, UBS chief executive, said the bank had taken action to strengthen controls.

    “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,” he said.

    UBS expects the fines to contribute to a net loss of between SFr2bn and SFr2.5bn in the fourth quarter.

    Like Barclays, UBS has admitted to two kinds of manipulation. It admitted that traders tried to move the Libor rate up and down to make money on derivatives, and that it understated its reported borrowing rates during the financial crisis to make the bank appear stronger.

    The FSA settlement portrays pervasive and persistent efforts to manipulate rates lasting from 2005 to 2010. It says at least 45 traders, managers and senior managers were involved in, or aware of, the attempts and that investigators found at least 2,000 requests for improper submissions.

    The misbehaviour spanned three continents and was widely discussed on group emails and in internal chat forums, the FSA said. Compliance failed to pick it up, despite making five audits of this part of the bank during the period.

    UBS traders also “colluded with interdealer brokers in co-ordinated attempts to influence” Japanese yen Libor submissions made by other banks, and the bank made “corrupt brokerage payments” to reward brokers who participated in the manipulation scheme, the FSA said.

    This marks the first time that brokers have been accused of taking payments to help with manipulation. Brokers Icap and RP Martin have previously acknowledged suspending employees in connection with the probe.

    The FSA decision notice said four UBS traders had made more than 1,000 requests to 11 employees at six interdealer brokers.

    Finma, meanwhile, found that UBS traders “made numerous requests asking bank employees responsible for submitting interest rates to submit higher or lower values” between 2006 and 2010, in an effort to “influence submissions in such a way as to benefit UBS proprietary trading positions”.

    The Swiss watchdog also found that some UBS managers had urged employees to submit rates that would “positively influence the perception of UBS’s creditworthiness” between 2007 and 2008. It said numerous employees and a limited number of managers were involved.

    The Libor probe has drawn in more than a dozen banks on three continents. Last week, three men, including a former UBS trader, were arrested in the UK and bailed without charge pending further investigation. Several former UBS employees have been notified by the FSA that they are personally under investigation.

    Wednesday’s settlement caps a tumultuous few months for Switzerland’s largest bank and its relatively new leadership team of Sergio Ermotti, chief executive, and Axel Weber, chairman.

    In November, UBS was fined £29.7m by the FSA for control failures that allowed rogue trader Kweku Adoboli to take positions that cost the bank $2.3bn in 2011 and Oswald Grübel, then chief executive, his job.

    The previous month, UBS announced a SFr2.2bn third-quarter loss as Mr Ermotti unveiled a plan to cut its investment banking operations in half. He said UBS would shed 10,000 jobs and refocus on its more lucrative wealth management operations.