"Mercenary" traders at UBS could have been manipulating Libor interest rates for years before the period it paid a record $1.4bn (£873m) in fines, its former bosses admitted today.
Managers, including its former chief executive Marcel Rohner, were accused of "incompetence and gross negligence" by members of the Parliamentary Commission on Banking Standards for failing to spot what the executives admitted was "stealing on a grand scale".
The fine was levied for activities by traders between 2005 and 2010, but the former UBS investment banking chief Huw Jenkins told the commission: "It [Libor fixing] was a very engrained part of the business areas, so it would not surprise me if it was going on before that. I'm clearly deeply sorry we didn't spot this. It is clearly a failing in our systems and controls and our culture that it wasn't highlighted."
Mr Rohner later explained the problem by saying: "When you grow a business too quickly, you hire people from many different places and some of them... you really have to qualify as mercenaries."
Members of the commission, who were told that Mr Jenkins was on a £10m package, looked on aghast when his successor, Jerker Johansson, admitted that he didn't even know of an internal review into the business area that dealt with Libor.
About 40 traders were involved. Some 18 were sacked and a further 22 had left the Swiss bank before the scandal.
Under pressure from Pat McFadden, a Labour member of the commission, and the chairman, Andrew Tyrie, Mr Johansson admitted that management failures were so bad that they amounted to negligence.
The bank's senior yen Libor trader managed to rack up profits of $40m, then $80m, then $160m between 2005 and 2007, and bosses highlighted the operation as a "key strength" in a presentation to London investors. But they failed to raise questions about why the numbers were booming.
Mr Tyrie described their ignorance as "staggering".
Mr Johansson, who ran the investment bank for just over a year, admitted negligence and said that what went on amounted to theft by the traders. He also accepted that the bank's codes of conduct were in effect "worthless".
Hector Sants, the former head of the Financial Services Authority, came under fire later because the ex-UBS managers admitted that they only heard about investigations into what went on at the bank during their tenure through reading the newspaper reports.
Mark Garnier, a former investment banker turned Conservative MP, said it sent "a very bad message" to the banking industry that the watchdog hadn't contacted the men. "The important point is that the first time these individuals have been held to account is when they came here this morning," he said.
Mr Sants, who is taking up a new job looking after compliance at Barclays, said regulators are introducing reforms to ensure that individual bank chiefs can be held to account and sanctioned when things go wrong. He also warned that Britain is exposed to a "danger'" from foreign banks with enormous branches in the UK. Subsidiaries of overseas firms operating in Britain are subject to UK regulation. Branches present watchdogs with a problem because they are the responsibility of the regulators in a bank's home country. This makes it hard for the FSA to act against a firm like, for example, JPMorgan, where a trader known as the London Whale lost billions of dollars through an enormous position built up through derivatives.
Mr Sants called for fundamental change in the way banks, including his new employer, are run. He pledged to consider setting up an anonymous phone line to enable staff to act as whistle blowers.
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