UBS Traders' 'Humongous' Libor-Fixing Boasts


The scale of Libor manipulation at Swiss bank UBS was laid bare in documents published by U.K. authorities Wednesday morning, which showed one trader openly boasting of keeping the benchmark rate artificially low.

The trader, described in Financial Services Authority documents as Trader A, wrote on instant message exchanges: "3m libor is too high cause I have kept it artificially high." This single employee appears to have made hundreds of requests to brokers to help manipulate the rate, according to the FSA. At least 45 UBS employees in total knew of, or were involved in, the rigging of the rate, the UK regulator said.

The FSA documents suggest a macho trading culture on the UBS trading floor. Trader A also said: "if you keep 6s [i.e. the six month JPY LIBOR rate] unchanged today ... I will ****ing do one humongous deal with you ... Like a 50,000 buck deal."

Traders and brokers implicated in the scandal referred to each other as "the three muscateers [sic]" and "captain caos [sic]." Three people, including one former UBS employee, have been arrested in the U.K. over the scandal, and bailed without any charge from police, although it is not known whether any of them are the individuals referred to in the documents.

UBS has agreed to pay a total 1.4 billion Swiss francs ($1.5 billion) to settle accusations that it tried to rig benchmark interest rates, the Swiss banking giant said on Wednesday.

In a press release issued by the bank, UBS said it had agreed with the U.S. Department of Justice "to enter a plea to one count of wire fraud relating to the manipulation of certain benchmark interest rates, including Yen LIBOR (London inter-bank offered rate)."

It will pay $1.2 billion to U.S. authorities, $260.2 million in fines to the FSA, and $64.6 million to Swiss authorities.

UBS said it will post a fourth-quarter net loss, primarily as a result of provisions for litigation and regulatory matters.

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There is also likely to be focus on the six inter-dealer brokers which put through more than 1,000 of the illicit trades. The brokers, who were paid by UBS, were allegedly asked to pass on requests to traders at other banks, place fake bids and manipulate rates on their trading screens.

The U.K.'s Financial Services Authority said in a statement that UBS traders, "routinely made requests to the individuals at UBS responsible for determining its LIBOR and EURIBOR submissions to adjust their submissions to benefit the traders' trading positions."

It said that "the misconduct was extensive and widespread" and added that "at least 2,000 requests for inappropriate submissions were documented – an unquantifiable number of oral requests, which by their nature would not be documented, were also made."

"Manipulation was also discussed in internal open chat forums and group emails, and was widely known," the FSA added.

At one point, a UBS employee known as Trader-Submitter C told a manager "I agree we shouldnt ve been talking about putting fixings for our positions on public chat." If the scandal ends up in court, plenty of his colleagues may agree.