UBS escapes prosecution in forex scandal, but pleads guilty over Libor rates

20th May 2015, Comments 0 comments

Swiss banking giant UBS said Wednesday it has escaped prosecution for foreign exchange manipulation, but that it lost immunity for manipulating Libor interbank rates and will plead guilty to fraud charges in the United States.

The announcement comes as four other major banks are expected to fined billions of dollars for rigging the foreign exchange market in settlements with US and British regulators.

The US Department of Justice dropped charges against UBS into the currency rigging probe, and granted it conditional immunity for cooperating with the authorities, the bank said in a statement.

It will nevertheless pay a $342-million (308-million-euro) penalty to the US Federal Reserve and change the way its foreign exchange system works, the bank said.

But a 2012 non-prosecution agreement between the bank and the US Department of Justice over the Libor interest rate scandal was revoked by US officials, the bank added.

UBS said it had agreed to plead guilty to one count of wire fraud for conduct in the Libor matter, pay a $203-million fine and accept a three-year term of probation.

UBS was fined the equivalent of $1.5 billion in 2012 by US, British and Swiss regulators for its role in the massive misconduct in the setting of the Libor rate, a global reference that affects products from student loans to mortgages.

The regulators verdicts on American giants JPMorgan Chase and Citigroup, British banks Barclays and Royal Bank of Scotland are expected to fall Wednesday.

UBS said the fines and penalties would not impact on the second quarter results as it was "fully provisioned for these resolutions."

At the end of the first quarter the bank had set aside 2.7 billion Swiss francs to cover litigation costs.

"The conduct of a small number of employees was unacceptable and we have taken appropriate disciplinary actions," UBS Chairman Axel Weber and group chief executive officer Sergio Ermotti said in a joint statement.

"We made significant investments to strengthen our control framework and compliance programs," they said, adding: "We self-detected this matter and reported it to the US Department of Justice and other authorities."

The bank said it would continue to cooperate with US authorities in ongoing investigations.

UBS shares climbed 2.2 percent to 20.26 Swiss francs in morning trade following the announcement.

Andreas Venditti, an analyst at Vontobel, said UBS had managed to emerge from the affair "at terms that we believe are clearly better than expected."

"We do not expect the Libor guilty plea to have a very negative impact on UBS," he said, adding that there would be "no financial impact on its second quarter results."

© 2015 AFP

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