UBS is now the second bank to have received an FSA fine for LIBOR and EURIBOR failings. The fine is an eye watering £160m. The headline figure is £200m, but that was reduced by a mandatory 20% due to the stage at which UBS settled.

UBS was found to have breached principle 5 (market conduct) in the period January 2005 to December 2010:

  • UBS traders routinely made requests to the internal rate submitters to adjust their submissions in order to benefit their trading positions. During the period in question, there were for example over 800 documented internal requests in respect of JPY LIBOR. The FSA said that, in view of the widespread nature of such requests, every LIBOR and EURIBOR submission in currencies and tenors in which UBS traded is at risk of having been improperly influenced;
  • Through four of its traders, UBS colluded with interdealer brokers to attempt to influence the JPY LIBOR submissions of other banks. The UBS traders were directly involved in making more than 1,000 documented requests to 11 brokers at six broker firms. In addition, through one of its traders, UBS colluded with individuals at panel banks to make submissions in relation to JPY LIBOR that benefited UBS trading positions (more than 80 documented requests, as well as making requests orally);
  • A number of managers at UBS knew about, and in some cases were actively involved in, the attempted manipulation. Improper requests directly involved 40 UBS individuals, 11 of whom were managers;
  • On a number of occasions from at least June 2008, UBS adopted LIBOR submissions directives whose primary purpose was to protect its reputation by avoiding negative media attention about its submissions and speculation about its creditworthiness.

In addition, UBS was found to have breached Principle 3 (systems and controls) in respect of different time periods in relation to LIBOR and EURIBOR, the earliest starting in January 2005:

  • No systems, controls or policies governing the procedure for making submissions;
  • It combined the role of determining submissions with proprietary trading in derivative products referenced to LIBOR and EURIBOR. This was an inherent conflict and UBS took no steps to manage it until later in 2009;
  • There were reviews in 2008 and 2009, and new procedures, but these were inadequate despite some of the changes implemented.

The Final Notice


This is the second of the fines to be announced in this area. The size of fines continues to grow. This fine eclipses the Barclays fine, which at the time was the highest ever FSA fine (see Enforcement Watch 8 "Barclays receives largest ever fine imposed by the FSA"). The FSA commented in the Final Notice that, although the misconduct was similar in nature, the UBS misconduct was considerably more serious than Barclays. It said this because it was more widespread within the firm, being exacerbated by the control failings, in particular the inherent conflict of interest in its submission function.

The public and authorities' interest continues almost unabated in relation to this issue. There is much press attention devoted to it and more disciplinary action trailed, with talk of other institutions settling. The backdrop to this is the conduct of individuals giving rise to the actions. We noted in our Barclays piece that one aspect of the affair would be how individuals had been treated; and observed that no action against individuals had yet come out. Since then, however, it has been reported that three people have been arrested in the UK in connection with the criminal probe. These were reportedly Tom Hayes (a former trader at UBS and Citigroup) and Terry Farr and Jim Gilmour of interdealer broker RP Martin.

The international co-operation between authorities is also worth mentioning. In the UBS probe, we note that the FSA thanks the CFTC, the DoJ, the FBI, FINMA and the SEC for their assistance. We also note that Tom Hayes (and Roger Darin) were both charged by the DoJ towards the end of last year. What is interesting is the press report of a supposed tussle between the SFO and the DoJ as a result of the DoJ apparently seeking the extradition of Tom Hayes. Although co-operation between regulators has increased internationally over recent years and will no doubt continue to do so, there may well be turf wars between them to come. In that context, the extradition of Hayes may well be a particularly toxic mixture, combining as it does the politically sensitive issues of UK/US extradition and of LIBOR.