Things can’t get much worse for UBS. Weeks after it was rocked by an FSA fine for almost £30 million for failure to detect the trading of a fraudulent banker, the Swiss bank was last week slammed with an almighty fine of almost £1 billion for manipulating
Libor rates. The fine is the second largest fine ever levied on a bank and is more than three times the fine Barclays received in the summer for its attempt to rig Libor. The payment includes a £160 million payment to the FSA, the largest penalty ever imposed
by the British regulator.
Communication between errant traders was found to come from all over the world, with at least 45 people aware of the rigging and breaches that occurred over a five year period between January 2005 and December 2010. The FSA said it had detected at least
2000 written requests and an unquantifiable number of spoken requests to manipulate the inter-bank benchmark rate. UBS also made fraudulent payments to brokers as rewards for manipulation of Libor.
The outcry about Libor manipulation has been deafening, with many pointing out that the banks are out of control and this should be further evidence to support the breaking up of bulge bracket banks.
You can guarantee that the UBS shareholders will be up in arms at the Swiss bank, furious that the bank has been involved in yet another maelstrom and its reputation tarnished. And the fine – the second largest ever levied – will possibly affect the bank’s
profit margin and therefore the shareholder dividend.
There is no doubt that the appropriate checks and measures should have been in place at UBS. Systems that flag up this type of errant behaviour should be part and parcel of any bank’s corporate governance strategy and systems. And the fact that it wasn’t
begs the question how embedded knowledge of Libor manipulation was within the organisation. In any case, the fact that a culture prevailed which allowed this to happen is seriously detrimental to UBS’s reputation.
The banks have a massive reputational clear up operation to do in 2013. Winning stakeholder trust back should be top of their list and they will do that partly through behaving correctly and policing their organisations more effectively.
Adam Ripley, Chairman, Certeco