UBS to pay $545 million in fines for manipulating currencies

UBS Group will pay $545 million to settle US investigations into its role in manipulating currency and interest rates, removing two of the bank's biggest legal hurdles.

The lender’s main unit, UBS, will plead guilty to fraud for manipulating benchmark interest rates and pay $203 million in fines after the Swiss bank violated an agreement that had allowed it to avoid prosecution, UBS said in a statement Wednesday.

In the currency case, UBS said it will pay $342 million to the Federal Reserve, which regulates foreign banks, and undertake remedial measures.

It won immunity for cooperating in a parallel antitrust probe, sparing the bank possible fines and felony charges on that score.

Four other global banks are expected to announce US settlements Wednesday over manipulating foreign exchange rates, people with knowledge of the discussions have said.

Citigroup, JPMorgan Chase, Barclays and Royal Bank of Scotland will probably enter pleas related to antitrust violations, the people said. UBS's settlement was lower than some analysts expected.

JPMorgan Chase and Co’s Kian Abouhossein had estimated the fine at 3 billion francs, he said Wednesday in a note to clients. Shares were up 3.1 per cent at 20.44 francs at 10.30am in Zurich.

UBS resolved the foreign exchange case under terms that are “clearly better than expected” and the guilty plea in the interest rate probe probably won’t have a “very negative impact,” said Andreas Venditti, a Zurich-based analyst at Vontobel Holding.’

The currency investigation led the US Justice Department to rip up a 2012 non-prosecution agreement with UBS that was designed to settle an earlier probe into the rigging of the London interbank offered rate, or Libor.

The deal was conditional on the bank not committing further US crimes during the next two years. The foreign exchange probe began less than a year later.

The new Libor settlement marks the first time the Justice Department has revoked a non-prosecution agreement in the banking industry and signals its determination to crack down on repeat offenders.

UBS said it will plead guilty to one count of wire fraud and accept a three-year probation.

“It’s disappointing they’ve had to plead guilty on a separate charge on Libor,” said Christopher Wheeler, an London-based analyst at Atlantic Equities in an interview with Bloomberg Television on Wednesday. “Sadly the reputational damage has been done.”

Bloomberg