UBS gets record fine as it is ordered to pay nearly 1bn over Libor-rigging scandal

UBS fined 1bn over bragging traders who called one another the 'three muscateers' as they rigged Libor interest rate
At least 45 people involved including traders, managers and senior managersFinancial Services Authority said practice was 'extensive and widespread'Traders asked colleagues to keep Libor and Euribor rates down for cash

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UPDATED:

01:30 GMT, 20 December 2012

Arrogant and reckless, bankers at UBS nicknamed one another the ‘three muscateers’, ‘superman’ and ‘Captain Caos’ as they rigged a crucial City interest rate.

And yesterday their corruption cost their City of London employer a fine of nearly 1billion.

Watchdogs said rigging the Libor interest rate – used to calculate the mortgages of millions – was ‘routine, widespread and condoned by a number of managers’ at UBS.

UBS has been fined nearly 1bn for the Libor-rigging scandal which included a record 160m fine from the FSA

UBS has been fined nearly 1bn for the Libor-rigging scandal which included a record 160m fine from the FSA

The regulators also said the behaviour
of some staff was ‘even more serious’ than what happened at Barclays –
fined 290million earlier this year for rigging Libor.

A string of compromising emails reveal
the UBS bankers’ congratulatory nicknames, though it appeared that,
despite their huge salaries, they were as reckless with their spelling
as they were with the bank’s cash.

INTERNATIONAL BANKS FOUND GUILTY OF FRAUD

An Italian judge has found four international banks guilty of fraud in a case involving the sale of derivatives to the city of Milan and ordered the confiscation of €88 million.

Judge Oscar Magi on Wednesday convicted Deutsche Bank, UBS, JP Morgan and Depfa Bank, as well as nine current and former bankers.

In Italy, institutions may be held responsible as well individuals.

The individuals received suspended sentences of six months to eight months.

The banks have denied wrongdoing.

Prosecutors allege that the city of Milan lost €105million as part of the sale of bonds totaling €1.69billion between 2005 and 2007.

Prosecutor Alfredo Robledo said the verdict recognized the importance of 'the fundamental principal of transparency on the part of banks in contracts with public administrations.'

A 40-page report from the Financial
Services Authority condemns staff at UBS for Libor rigging between
January 2005 and December 2010.

The regulator fined UBS 160million, with the remainder of the total fine split between Swiss and US regulators.

The FSA said that staff fixed Libor
rates to benefit their own trading activities. They also rigged Libor
during the financial crisis to make the bank appear stronger than it
was.

They set up fictitious and ‘corrupt’
transactions to pay each other for Libor-rigging and, said the FSA,
awareness of such wrongdoing went as high as managerial level.

The City watchdog said their
activities ‘undermined the integrity’ of the benchmark rate, which is
used to calculate financial transactions worth more than 300trillion,
including mortgage rates.

Extracts from messages exchanged between UBS staff reveal their astonishing arrogance.

In one, ‘Trader A’ asks a broker at
another firm to help him set a high rate, addressing his friend as
‘superman’ and urging him to ‘be a hero today’.

A broker at another bank accepted the
challenge of rigging Libor with glee, telling Trader A he was ‘putting
the captain caos outfit on as we speak’. Trader A was named as one of
‘three muscateers’.

Such was the regularity of
manipulation that one banker, in response to a single request to fix
Libor, replied ‘Standing order, sir’

aThe FSA said misconduct at UBS was 'extensive and widespread' with traders routinely trying to benefit their trading positions

The FSA said misconduct at UBS was 'extensive and widespread' with traders routinely trying to benefit their trading positions

Sergio Ermotti, chief executive of UBS, said the group had 'taken decisive and appropriate actions' following the probe

Sergio Ermotti, chief executive of UBS, said the group had 'taken decisive and appropriate actions' following the probe

The FSA said the UBS case was
‘considerably more serious than Barclays’ because the wrongdoing was
more widespread and senior managers were aware of it. It raised
particular concern over one exchange, in which a UBS trader offered to
pay a broker friend if he will leave the rate unchanged.

The trader wrote: ‘I’ll pay you, you know, 50,000 dollars, 100,000 dollars …whatever you want. I’m a man of my word.’

Such rewards were arranged through
so-called ‘wash trades’, risk-free trades that cancelled each other out
but generated ‘illicit fees’ of more than 170,000 for brokers.

The traders quoted in the FSA’s report
have not been named, but two UBS staff – 33-year-old Briton Tom Hayes
and Roger Darin, 41, based in Switzerland – were yesterday charged in
the US with conspiracy to fix Libor. They face the prospect of
extradition.

The FSA said the behaviour at UBS showed a ‘total disregard for proper standards’.

Some 40 staff were involved in making
more than 1,000 ‘improper requests’, while a further 70 would have been
aware of the wrongdoing.

UBS chief Sergio Ermotti said: ‘We deeply regret this inappropriate and unethical behaviour.’

The revelations are another blow to
the Swiss bank’s deals reputation, after trader Kweku Adoboli was found
guilty of fraud earlier this year after his bad deals lost 1.4billion.

The Financial Services Bill, which
received Royal Assent yesterday creates a criminal offence for making
‘misleading statements’ in relation to benchmark rates such as Libor.

Andrew Tyrie MP, who is leading the
Parliamentary Commission on Banking Standards, said the FSA report had
exposed ‘collusion, corruption and much else besides.’