Regulators Prove UBS Employees Engaged in Rigging Rates
Hong Kong regulators found there was fire beneath the smoke that prompted an investigation of UBS (NYSE:UBS) and other banks that have an influence on international interest rates. According to a Bloomberg report, the Hong Kong Monetary Authority identified nearly 100 messages sent via internal chat by UBS employees that violate rules set for traders, though the impact on rates was insignificant. The central bank has ordered UBS to discipline its employees, most of whom no longer work at the Switzerland-based institution.
It took over a year for investigators to identify the messages that sought to fix the Hong Kong Interbank Offer Rate (HIBOR) used for mortgages and other loans. Much of that time was spent deciding whether UBS employees colluded with traders from other banks. Bloomberg reports the Hong Kong Monetary Authority found no evidence of collusion between UBS and other banks. For this reason, the central bank declared the impact of the fixing scheme inconsequential.
Nonetheless, Hong Kong central bank officials publicly chided UBS for not reporting the violations to authorities. It has asked UBS to discipline the employees. According to The New York Times, six of the employees who sent messages to the banker submitting rates have left UBS, as has the employee who dispatched the UBS recommended rates. No fines were levied against UBS as a result of the Honk Kong central bank’s findings.
UBS has not been involved in setting the Hong Kong interbank rate since 2010. In 2012, the result was far different when UBS employees were found trying to rig the LIBOR and other rates.
The fines imposed by U.S. and European authorities in 2012 exceeded $1.5 billion when UBS traders were caught in an attempt to influence rates. UBS has pledged to comply with all recommendations of the Hong Kong Monetary Authority.
In a company statement, UBS called the investigation “a clear reminder to all banks of their duty to uphold robust internal controls and governance, ” the Times reports. On that note, UBS is currently engaged in other internal investigations regarding its foreign currency exchange and metals pricing. Bloomberg reports that the results of these probes are forthcoming.
Since the punishment amounts to little more than a slap on the wrist for UBS in Hong Kong, it’s difficult to say the bank has felt the sting of Hong Kong regulators’ punishment. In the West, the fees were far more palpable. Depending on what UBS finds with respect to its foreign exchange unit, its legal fees may once again become costly.