UBS AG recently announced settlements with the U.S. Department of Justice and the Commodity Futures Trading Commission in connection with charges that UBS manipulated LIBOR benchmark interest rates.
LIBOR, short for the London Interbank Offered Rate, is an international daily reference rate intended to reflect interest rates at which banks borrow unsecured funds. LIBOR is based on interest rates self-reported by leading London banks, and is published as an average of the numbers after some adjustments.
Hundreds of trillions of dollars in mortgages, student loans, credit card debt, financial derivatives, and other financial products worldwide are tied to LIBOR, which serves as the premier benchmark for short-term interest rates.
As part of a proposed agreement, UBS Securities Japan Co. Ltd. has agreed to enter a plea to one count of wire fraud relating to the manipulation of certain benchmark interest rates, including Yen LIBOR.
Two former UBS traders, Tom Alexander William Hayes and Roger Darin, were charged in a criminal complaint with conspiracy to manipulate LIBOR. Hayes has also been charged with wire fraud and an antitrust violation. Emails between UBS traders, made public as part of the investigation, provide evidence of market manipulation.
UBS conduct described in the settlements includes the following:
- Certain UBS personnel engaged in efforts to manipulate submissions for certain benchmark rates to benefit trading positions;
- Certain employees at the bank colluded with employees at other banks and cash brokers to influence certain benchmark rates to benefit their trading positions; and
- Certain personnel gave inappropriate directions to UBS submitters that were in part motivated by a desire to avoid unfair and negative market and media perceptions during the financial crisis.
The conduct encompassed by the settlements includes Yen LIBOR, GBP LIBOR, CHF LIBOR, Euro LIBOR, USD LIBOR, Euribor and Euroyen TIBOR, although the nature and extent of the conduct in question varied significantly from one currency to another.
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