UBS AG Close To Reaching An Agreement on LIBOR Scandal

UBSBy twicepix ( [CC BY-SA 2.0], via Wikimedia Commons

UBS AG (NYSE:UBS), the Swiss banking giant, is close to reaching a settlement with U.S. and British authorities over the manipulation of the interest rate. The case has petrified the financial industry and urged public outcries for broad reforms.

UBS AG Close To Reaching An Agreement on LIBOR Scandal

UBS AG (NYSE:UBS) is expected to pay more than $450 million to settle the claims related to LIBOR scandal. The employees of the company are said to have reported false rates to increase the profits. The LIBOR (London Interbank Offered rate) scandal is a series of deceptive actions connected to Libor. The scandal drew the attention of the press when news leaked out that in order to show their creditworthiness and to increase their profit, Banks increase or decrease their rates

Libor is widely used in the U.S. derivative market, so an attempt to manipulate the Libor would be strongly considered as the attempt to manipulate the U.S. derivative market. Mortgages, student loans, financial derivatives, and financial products often depend on Libor.

If UBS AG (NYSE:UBS) settles the deals with other authorities, the collective penalties will capitulate the largest total fines to date related to an interest rate rigging inquiry and enhance the possibilities of other financial institutions facing stiff penalties. UBS is expected to pay more than $450 million to settle. In June, Barclays Plc (LON: BARC) (NYSE:BCS) settled with the authorities by paying $450 million.

The reform gained momentum after Barclays was charged with fine.  Some banks are in progressed settlement talks, including Royal Bank of Scotland Group plc (LON:RBS) (NYSE:RBS). Royal Bank of Scotland Group plc (LON:RBS) (NYSE:RBS) said that it would disclose the penalties before the earnings are reported in February next year. Deutsche bank AG  (NYSE:DB) is said to have kept aside the sum of potential fines, although it was too early to predict as to how much the penalty would be.

In an increased investigation, Canadian, Swiss, and Asian authorities, justice departments, the Commodity Future Trading Commission, and Britain’s financial service authority are probing the actions of more than a dozen of Banks. Banks like Citigroup Inc. (NYSE:C), JPMorgan Chase & Co (NYSE:JPM), and HSBC Holdings plc (NYSE:HBC) (LON:HSBA) are also under  scrutiny from the Futures Commission.

The Libor-rigging investigation for UBS came at the wrong time. Since the financial crisis, the Bank has suffered a series of allegations. In 2009, the bank settled a payment agreement of $780 million to settle arraignments by American authorities, in a case that claimed that it favored rich and wealthy clients to avoid taxes.

In 2011, UBS AG (NYSE:UBS) testified regarding a $2.3 billion loss by rogue trader Kweku M.Adoboli, who was sentenced to seven years in prison. The firm agreed to pay a $47.5 million penalty to the British authorities in connection with the trading loss.

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About the Author

Aman Jain
Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at

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