Tuesday, December 18, 2012

UBS to admit to criminal wrongdoing and pay $1.5 billion for manipulating Libor and related rates

According to a Reuters article, UBS will admit to criminal wrongdoing and pay $1.5 billion in fines for its role in manipulating Libor and related benchmark interest rates.

The interesting question is will anyone think that this will change the standards or culture of the big global banks?

I think the answer is an emphatic NO!

While I give the head of UBS, Axel Weber, tremendous credit for admitting criminal wrongdoing when HSBC just showed that big global banks don't have to, this is not enough to change the standards or culture of UBS, let alone the banking industry.

Regular readers know that what allowed the UBS bankers to engage in interest rate manipulation was opacity.  Opacity hid their activities.

The only way to change the standards or culture of UBS and the global banks is to require these banks to provide on an ongoing basis ultra transparency and disclose their current global asset, liability and off-balance sheet exposure details.

This amount of sunlight is necessary to disinfect and bring about real change in the standards and culture of big banks.

Switzerland's UBS is set to pay the second-largest fine ever levied on a bank on Wednesday when it admits that a group of its traders rigged Libor interest rates. 
Zurich-based UBS will pay around $1.5 billion for the manipulation of yen Libor between 2005 and 2010 by 36 of its staff around the globe, a source familiar with the matter has said....
The UBS settlement will be with U.S., British and Swiss regulators, although the last has no power to fine the bank. Japanese regulators are also involved, some sources have said, although it is not clear if they will be formally involved in the penalties. 
UBS will admit to criminal wrongdoing by its Japanese arm, where one of its traders manipulated yen Libor and euro yen contracts, sources familiar with the matter have told Reuters.

UBS's settlement would be more than three times the $450 million levied on British bank Barclays in June for similar misdeeds in the setting of benchmark interest rates, indicating the scope of wrongdoing at the Swiss bank was more extensive.... 
Since news broke last week that UBS's settlement could be more than $1 billion, the bank's shares have barely reacted, trading just shy of their highest level in 18 months. 
The potential for political fallout in Switzerland against UBS is harder to judge, however. 
While Barclays' settlement touched off a firestorm in Britain that forced its chairman and chief executive to quit, previous scandals at UBS have already culled the ranks of top bosses, as has the decision to wind down parts of the investment bank that had tarnished the bank's name. 
However, the settlement could add to global public and political anger about standards and culture across the industry. 
Admitting to criminal wrongdoing can be fatal for a bank, as it can lose its license, and authorities are wary of pushing big banks to the brink. By admitting to the charge against its Japanese subsidiary, UBS is stopping short of admitting to wrongdoing at a group level. 
Between 25 and 30 people have left UBS as a result of the Libor rigging investigation, according to sources. 
The bank had hoped for a softer touch from regulators by cooperating in industry-wide probes and was surprised by the size of the expected settlement, they added.

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