Washington, D.C. – December 19, 2012 – UBS AG and UBS Securities Japan Co., Ltd. have been penalized by the U.S. Commodity Futures Trading Commission (CFTC) for manipulating global benchmark interest rates, resulting in a $700 million civil monetary penalty.
The CFTC’s order details charges of manipulation, attempted manipulation, and false reporting related to key benchmarks including the London Interbank Offered Rate (LIBOR), the Euro Interbank Offered Rate (Euribor), and the Euroyen Tokyo Interbank Offered Rate (Euroyen TIBOR). These rates underpin trillions of dollars in financial transactions globally, impacting everything from mortgages to international loans.
According to the CFTC, from at least 2005 to 2010, UBS engaged in systematic efforts to skew its submissions for these benchmark rates. These submissions, intended to reflect true borrowing costs, were often deliberately altered to benefit the bank’s derivatives trading positions. The manipulative conduct involved over three dozen traders and submitters across offices in London, Zurich, Tokyo, and other locations.
CFTC Director of Enforcement, David Meister, stated the action demonstrated the agency’s commitment to policing benchmark integrity. “The American public… rely on interest rate benchmarks every day… trusting that the underlying benchmark rates are honest,” he said. “Market integrity is seriously compromised where… a bank spins its rate submissions to boost trading profits.”
The Order found that UBS continued this practice even after being notified of a CFTC investigation in October 2008. The misconduct was uncovered following an internal inquiry launched by UBS at the CFTC’s request in April 2010. The settlement requires UBS to cease and desist from further violations and implement measures to improve the integrity and reliability of its benchmark interest rate submissions, as well as strengthen internal controls.
The penalty of $700 million reflects the scale and duration of the manipulation. The CFTC’s investigation uncovered evidence of traders colluding to influence rates and a network of brokers being used to disseminate false information.
Source: CFTC.gov
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