By Rebecca Burn-Callander Friday, 14 December 2012

UBS to be slapped with £1bn fine over Libor?

UBS is the latest bank facing a fine over alleged Libor-rigging. And this one is the heftiest of the lot.

When Barclays paid up £290m to atone for its Libor wrongdoing, there was a sharp intake of breath in the banking industry. Then, when RBS admitted it may have to pay up to $480m for its part in the scandal, the fear factor went up again.

Now, it emerges that Swiss bank UBS may have to cough up as much as £1bn to settle allegations that it rigged Libor. Veins will be bulging in the foreheads of banking chiefs across the world.
 
This fine is the final indignity for the Zurich-based bank, which has had a turbulent year plagued with scandals. Rogue trader Kweku Adoboli was jailed last month, and let’s not forget the bank’s £233m loss on Facebook’s botched stock market flotation…  

As a result of all this controversy, UBS has been forced to shrink its investment banking arm, which will result in 10,000 roles being axed worldwide. Overall, headcount will drop from 64,000 to 54,000 by 2015, with some 75% of the losses made outside Switzerland – bad news for the City.

But the £1bn Libor fine has not been set in stone yet. UBS is in last-minute talks with the Financial Services Authority, the US Department of Justice, US Commodity Futures Trading Commission and Finma (UBS's supervisor in Switzerland) to try and reach an agreement on the size of the settlement. UBS will have to have the bartering skills of a Bedouin trader to haggle that lot down.

It is clear that regulators mean to get their pound of flesh over the Libor scandal. The public will not be appeased by a little light wrist-slapping, and the first actual arrests were made by the Serious Fraud Office only this week. In total, some 20 banking institutions are being subjected to the financial equivalent of a cavity search. And, if regulators manage to uncover any further evidence of wrongdoing, it could get considerably more uncomfortable…



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