US and British regulators have ordered Swiss banking giant UBS to pay $1.5bn for manipulating a key interest rate, the Libor or London Interbank Offered Rate.
The settlement includes payment of $1.2bn in combined fines to the US Department of Justice and the Commodities Futures Trading Commission, $260m to Britain’s Financial Services Authority (FSA) and $65m to the Swiss Financial Market Supervisory Authority.
“UBS agrees to pay approximately CHF 1.4bn in fines and disgorgement to US, UK and Swiss authorities to resolve Libor-related investigations,” the bank said in a statement on Wednesday.
The bank has also agreed to admit to committing wire fraud through its Tokyo office in the case of manipulating Libor rates for loans denominated in Japanese yen, among others, the statement said.
“As part of a proposed agreement with the US Department of Justice, UBS Securities Japan Co. Ltd. (UBSSJ) has agreed to enter a plea to one count of wire fraud relating to the manipulation of certain benchmark interest rates, including Yen Libor,” it said.
UBS, which is based in Zurich, is the second major bank to be fined over the interbank lending rate scandal after Britain’s Barclays bank was ordered to pay $450m to British and US authorities in the summer for attempted manipulation of interbank rates between 2005 and 2009.
The fine is the second-biggest ever levied on a bank with banking giant HSBC fined $1.9bn recently for money laundering.
UBS was the first bank to reveal problems in the rate-setting process of the Libor which is supposed to be a measure at which banks lend money to each other and also affects a vast range of contracts around the world.
Other banks are also reportedly in advanced talks with regulators about settling allegations that they too manipulated their Libor information, including Royal Bank of Scotland and Deutsche Bank.
The Libor system was found to be open to abuse, with some traders lying about market interest rates to boost positions or make groups seem more secure.