UBS’s breaches of the FSA’s requirements encompassed a number of issues, involved a significant number of employees and occurred over a period of years in a number of countries. Between 1 January 2005 to 31 December 2010 the misconduct included:
Giving the roles of determining its LIBOR and EURIBOR submissions to traders whose positions made a profit or loss depending on the LIBOR / EURIBOR fixes. This combination of roles was a fundamental flaw in organisational structure given the inherent conflict of interest between these two roles.
Colluding with interdealer brokers in co-ordinated attempts to influence Japanese Yen (JPY) LIBOR submissions made by other panel banks. Corrupt brokerage payments were made to reward brokers for their efforts to manipulate the LIBOR submissions of panel banks.
Colluding with individuals at other panel banks to get them to make JPY LIBOR submissions that benefited UBS’s trading positions.
Adopting LIBOR submissions directives whose primary purpose was to protect the bank’s reputation by avoiding negative media attention about its submissions and speculation about its creditworthiness.
The misconduct was extensive and widespread. At least 2,000 requests for inappropriate submissions were documented – an unquantifiable number of oral requests, which by their nature would not be documented, were also made. Manipulation was also discussed in internal open chat forums and group emails, and was widely known. At least 45 individuals including traders, managers and senior managers were involved in, or aware of, the practice of attempting to influence submissions. The routine and widespread manipulation of the submissions was not detected by Compliance or by Group Internal Audit, which undertook five audits of the relevant business area during the relevant period.
Even when the trading and submitting roles were split in Autumn 2009, UBS’s systems and controls did not prevent traders from camouflaging their requests as 'market colour'. Given the widespread and routine nature of the requests to change LIBOR and EURIBOR and the nature of the control failures, the FSA found that every LIBOR and EURIBOR submission, in currencies and tenors in which UBS traded during the relevant period, was at risk of having been improperly influenced to benefit derivatives trading positions.
The misconduct occurred in various locations around the world including Japan, Switzerland, the UK and the USA.
Tracey McDermott, FSA director of enforcement and financial crime, said: 'The findings we have set out in our notice today do not make for pretty reading. The integrity of benchmarks such as LIBOR and EURIBOR are of fundamental importance to both UK and international financial markets. UBS traders and managers ignored this. They manipulated UBS’s submissions in order to benefit their own positions and to protect UBS’s reputation, showing a total disregard for the millions of market participants around the world who were also affected by LIBOR and EURIBOR. UBS’s misconduct was all the more serious because of the orchestrated attempts to manipulate the JPY LIBOR submissions of other banks as well as its own and the collusion with interdealer brokers and other panel banks in coordinated efforts to manipulate the fix'.
'Over an extended period UBS allowed this to happen through its failure to control its business appropriately to ensure that LIBOR and EURIBOR submissions properly reflected the relevant requirements. There should be no doubt about how seriously the FSA views these failings. This is our largest penalty to date and demonstrates our commitment to ensuring that those in the wholesale markets do not put their own interests above those of the markets as a whole'.
The FSA continues to pursue a number of other significant cross-border investigations in relation to LIBOR and EURIBOR.
UBS did not qualify for the full 30% discount available for early settlement under the FSA’s settlement discount scheme (known as 'Stage One'). Because settlement was reached in the second phase of the discount scheme (known as 'Stage Two'), UBS received a reduced discount of 20%. Without the discount the fine would have been £200m.
This was a significant cross-border investigation and, in particular, the FSA would like to thank the U.S. Commodity Futures Trading Commission (CFTC), the U.S. Department of Justice (DoJ) (together with the Federal Bureau of Investigation (FBI)), the Swiss Financial Market Supervisory Authority (FINMA) and the Securities and Exchange Commission (SEC) for their co-operation.