No more heads to roll at UBS for key rate fiddling

 
Tim Wallace
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UBS chief executive Sergio Ermotti yesterday led the charge to rehabilitate the bank’s image, insisting major changes have already been made to make sure Libor fiddling can never happen again.

The fine comes after a series of blows shaking up the bank, from rogue trader Kweku Adoboli losing £1.4bn to the bank deciding to wind down its fixed income operations, losing 10,000 jobs over the next three years.

While Barclays’s top brass – chief executive Bob Diamond, chairman Marcus Agius and chief operating officer Jerry del Missier – all resigned over the scandal, UBS’s leaders are distanced from the crisis.

Ermotti only joined the bank in September 2011 from Italian institution UniCredit, while the Libor-fiddling took place from 2005 to 2010.

Similarly chairman Axel Weber took up the role earlier this year, joining UBS from the Bundesbank.

And investment bank head Andrea Orcel was hired in March, and so is also clear of past wrongdoing.

But that does not mean other traders are not in trouble – the Financial Services Authority is investigating dozens of former staff, and although the US authorities charged two yesterday they are believed to be considering action against others involved in rate rigging.

The bank has already acted against those it knows to have been involved.

The majority have been fired or left the bank, while those involved on the periphery were given other sanctions, for example losing their bonuses or deferred payments.

And UBS said it has changed its Libor-setting processes to avoid any repeat.

“UBS has continued to strengthen its benchmark submission processes and procedures, in line with ongoing industry discussions around benchmark reform such as the reviews initiated by the FSA and European Banking Federation,” it said in a statement.

It is believed to have moved the function to the group treasury to avoid any direct conflicts of interest, while the proprietary trading desk – whose positions benefited from the altered rates – has been shut down.

By acting quickly in the settlement process, the bank received a discount on its UK fine, worth 20 per cent and so reducing the charge from £200m to £160m.

TIMELINE: THE LIBOR SCANDAL

1984-1986 Libor developed by the British Bankers’ Association to give a daily update on the rate at which banks were lending

2005 UBS, Barclays and other banks fiddled various rates around the world – in UBS’s case, largely Japanese yen Libor. Traders tried to fix the rate to benefit their trading books.

2007-2009 In the financial crisis, various banks entered artificially low Libor numbers to disguise their true borrowing costs.

2007 In August 2007, US officials were tipped off that rates were being set artificially low by worried banks.

2008 Banks such as Barclays began to come clean to the authorities that
something was amiss in the Libor system

2009 The BBA reviewed Libor and advised member banks to do the same – but little action was apparently taken

2011 RBS fired staff for alleged Libor-fixing

2012 Barclays fined £290m for Libor fixing. Top brass resign after scandal. Regulators review Libor, taking control from the BBA and establishing a new board to run the rate. UBS fined £940m for entering false data around the globe.

2013 RBS likely to be the next bank to settle the claims.