UBS braced for 'material fines' in FX settlement

(PA)

Swiss bank UBS has said it could face “material” fines and costs as it became the first bank to say it was in talks with regulators to settle foreign exchange rigging charges.

The bank declined to confirm that Britain’s Financial Conduct Authority is one of the regulators it is talking to about settling. But it is believed UBS and five other banks — Barclays, HSBC, Royal Bank of Scotland, Citgroup and JPMorgan — are in talks with the FCA.

Settlements for the six could be as high as £1.5 billion for the FCA alone. That could dwarf fines for Libor rigging which saw UBS pay the FCA a record £160 million in 2012.

“Some investigating authorities have initiated discussions of possible terms of a resolution of their investigations,” UBS said today. “The terms proposed include findings that UBS failed to have adequate controls in relation to its foreign exchange business that were adequate to prevent misconduct, and would involve material monetary penalties.”

The revelation came in a near 400-page document detailing the bank’s plans to create a new holding company which would make it much easier to ring-fence any parts of its business which got into trouble.

UBS also revealed that profits in July and August had beaten analysts’ forecasts for the whole of the third quarter. Earning in those two months were Swfr731 million (£473 million) against forecasts for the quarter of Swfr711 million. But analysts said the bank was still in danger of missing its own growth targets.

Regulators are keen to reach a broad settlement with banks over foreign exchange benchmark manipulation, with suggestions that a deal could come as early as November. The FCA, the US Department of Justice, US Commodity Future Trading Commission, Swiss Competition Commission, UK Serious Fraud Office and Hong Kong Monetary Authority are all investigating the alleged rigging.

UBS declined to say which of these it was in settlement talks with but added: “It is possible that other investigating authorities may seek to commence discussions of potential resolutions in the near future.”