UBS to Avoid Fine In EU Libor Probe
Baku, November 22 (AZERTAC). UBS AG UBSN.VX -0.90% has reached an immunity deal with European Union antitrust authorities that will spare the giant Swiss bank from further fines for manipulation of benchmark interest rates, according to people familiar with the matter.
Under the arrangement, UBS is rewarded for cooperating with investigators and turning over information about other banks. Barclays BARC.LN +0.03% PLC previously reached a similar deal with EU authorities. That means that two of Europe's largest banks, which are at the center of the interest-rate manipulation scandal, will escape punishment when EU authorities conclude their probe, which is expected within weeks although the timing could slip.
The ironic outcome is a result of EU rules that grant immunity to whistleblowers in cartel cases, a policy designed to encourage corporate wrongdoers to self-report collusion.
The EU is expected to conclude that a handful of banks broke EU laws forbidding cartels and collusive behavior and to levy fines of hundreds of millions of euros against each of them, these people said.
The situation has left top executives at rival banks, which people familiar with the matter say are poised to get hit with individual penalties in the high hundreds of millions of euros, howling about the system's supposed injustice. One industry official described the industry mood as "absolutely livid."
Cartels, which are by their nature secret, are difficult to prove without a whistleblower. In 2002, the EU revamped its leniency program to encourage more whistleblowers to speak up. Under the program, the first cartelist to confess and cooperate can get its fine eliminated, and subsequent cooperators can get theirs reduced.
The changes have led to a rush to confess and an explosion in fines. In the decade of the 1990s, the EU imposed €833 million ($1.1 billion) in cartel fines. In the 2000s, it was nearly €9 billion. Sometimes, big players have escaped punishment: In a 2007 case involving electrical components, the EU reduced to zero a potential fine of €215 million against ABB Ltd. of Switzerland which acted as a whistleblower in the case; the other cartelists were fined a total of €750 million.
UBS has been granted immunity in the part of the case that relates to efforts to manipulate the London interbank offered rate, or Libor. Barclays's immunity relates to the euro interbank offered rate, or Euribor. Several banks are seeking leniency, according to people familiar with the matter.
UBS and Barclays last year settled U.S. and British allegations that their employees were engaged in widespread efforts to manipulate Libor and Euribor. As part of those settlements, which totaled nearly $2 billion, authorities said that senior Barclays executives were involved in efforts to skew Libor and that a number of UBS traders and managers orchestrated a fraudulent rate-rigging scheme involving several other banks and brokerage firms.
Both banks admitted wrongdoing in their settlements.
The Libor investigation got under way in 2008 after a series of Wall Street Journal articles about apparent irregularities in the benchmarks. After they were contacted by U.S. and British authorities, UBS and Barclays conducted internal reviews that eventually uncovered extensive wrongdoing within their trading businesses, the banks have said.
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