Ex-UBS traders charged over Libor rigging

 

Two former UBS traders have been charged by United States prosecutors in connection with efforts to manipulate Libor interest rates.

The move comes after the Swiss bank was fined £940 million by regulators for "extensive and widespread" attempts to rig interbank lending rates.

Former traders Tom Hayes and Roger Darin have been charged with conspiracy to manipulate the interbank lending rate. Mr Hayes has also been charged with wire fraud and an antitrust violation.

The US criminal charges are the first to be brought in the worldwide scandal.

The charges against Hayes, a former trader who has worked in London and Tokyo, and Darin, from Switzerland, were revealed in a district court in New York today, according to the US Department for Justice.

US attorney general Eric Holder said: "By causing UBS and other financial institutions to spread false and misleading information about Libor, the alleged conspirators we've charged - along with others at UBS - manipulated the benchmark interest rate upon which many transactions and consumer financial products are based.

"They defrauded the company's counterparties of millions of dollars. And they did so primarily to reap increased profits, and secure bigger bonuses, for themselves."

Libor is the umbrella term for benchmark rates that underpin the terms of 500 trillion US dollars of contracts from mortgages to the cost of corporate lending.

UBS agreed a record £160 million penalty from the UK's Financial Services Authority (FSA) earlier today after admitting to fraud and corrupt payments to brokers.

As well as the FSA fine, UBS said it had also agreed to pay 1.2 billion US dollars (£737 million) in combined fines to the US Department of Justice and the Commodities Futures Trading Commission, and 59 million Swiss francs (£40 million) to UBS's main Swiss supervisor, the Swiss Financial Market Supervisory Authority.

The bank also admitted committing wire fraud through its office in Japan relating to rate manipulation.

UBS said the fines were likely to see it report a loss of around 2 billion to 2.5 billion Swiss francs (£1.3 billion to £1.7 billion) for the fourth quarter.

The Zurich-based bank, which has around 6,500 staff in London, has endured a turbulent year after the jailing of rogue trader Kweku Adoboli.

In its report, the FSA said the misconduct was rife throughout the bank between 2005 and the end of 2010 as UBS traders routinely made requests to colleagues responsible for determining Libor and Euribor submissions to benefit their own trading positions.

It said that at least 45 individuals, including traders, managers and senior managers, were involved in, or aware of, the practice. The regulator recorded at least 2,000 requests for inappropriate submissions and said many more would have been made verbally.

Misconduct at the bank was so routine during the five-year period that every Libor and Euribor submission was at risk of having been manipulated, according to the FSA.

The FSA said misconduct at UBS was "all the more serious" as it had attempted to manipulate Libor submissions at other banks, making corrupt payments to reward brokers for their efforts.

The bank set up unnecessary trades, known as "wash trades", to bribe brokers for their help, which saw one broker firm make £170,000 in illicit fees.

UBS also made corrupt payments of £15,000 a quarter to another broker firm over at least 18 months, according to the FSA.

The report from the FSA revealed incriminating conversations between UBS traders and brokers, saying they would "play the rules" and "return the favour".

One trader said: "I need you to keep it (the six-month Japanese Libor rate) as low as possible... if you do that... I'll pay you, you know, 50,000 dollars, 100,000 dollars... whatever you want... I'm a man of my word."

Bankers referred to each other in congratulatory terms, such as "the three muscateers" (sic), "Superman", and "Captain caos" (sic), the FSA added.

Swiss regulator Finma discovered that a lot of the rate-fixing originated in UBS's Tokyo office.

According to details released by Finma, one trader asked another trader: "Could you do me favour would you mind moving you(r) 6 month l(i)bor up a bit today."

Sergio Ermotti, chief executive of UBS, said the group had "taken decisive and appropriate actions" following the investigation.

Between 30 and 40 people are understood to have left UBS or been asked to leave as a result of the investigation.

Mr Ermotti said: "We deeply regret this inappropriate and unethical behaviour.

"No amount of profit is more important than the reputation of this firm, and we are committed to doing business with integrity."

The rate-rigging investigation, which has embroiled about 20 financial institutions, has accelerated, with the first arrests by the Serious Fraud Office taking place last week.

Taxpayer-backed Royal Bank of Scotland has previously said it hopes to settle any claims over Libor manipulation soon and warned that potential penalties could be significant.

The FSA remained tight-lipped on which other firms are being investigated, saying only that it "continues to pursue a number of other significant cross-border investigations in relation to Libor and Euribor".

PA

Start your day with The Independent, sign up for daily news emails
Life and Style
love + sex A new study has revealed the average size - but does that leave men outside the 'normal' range being thought of as 'abnormal'?
Arts and Entertainment
TV
Voices
The Palace of Westminster is falling down, according to John Bercow
voices..says Matthew Norman
Sport
Steve Bruce and Gus Poyet clash
football
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA special investigation by Andy McSmith
News
Graham Norton said Irish broadcaster RTE’s decision to settle was ‘moronic’
TV
Arts and Entertainment
Jake and Dinos Chapman were motivated by revenge to make 'Bring me the Head of Franco Toselli! '
arts + ents Shapero Modern Gallery to show explicit Chapman Brothers film
Arts and Entertainment
Kurt Cobain performing for 'MTV Unplugged' in New York, shortly before his death
music Brett Morgen's 'Cobain: Montage of Heck' debunks many of the myths
Life and Style
life
Sport
Brendan Rodgers
football The Liverpool manager will be the first option after Pep Guardiola
News
Amazon misled consumers about subscription fees, the ASA has ruled
news
Arts and Entertainment
Myanna Buring, Julian Rhind-Tutt and Russell Tovey in 'Banished'
TV Jimmy McGovern tackles 18th-century crime and punishment
Arts and Entertainment
Paul Whitehouse as Herbert
arts + ents
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Lettings and Sales Negotiator - OTE £46,000

£16000 - £46000 per annum: Recruitment Genius: This is an opportunity to join ...

Recruitment Genius: Home Care Worker - Reading and Surrounding Areas

£9 - £13 per hour: Recruitment Genius: This is a great opportunity to join a s...

Recruitment Genius: Key Sales Account Manager - OTE £35,000

£25000 - £35000 per annum: Recruitment Genius: Have you got a proven track rec...

Recruitment Genius: Sales Executive - OTE £40,000

£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

Day In a Page

Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot
Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

Poldark star Heida Reed

'I don't think a single bodice gets ripped'
The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn