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January 10, 2013

UBS fires eighteen over Libor-rigging scandal

Eighteen UBS staff were sacked over the Libor-rigging scandal that saw the bank hand over $1.5bn (£940m) to regulators, the second-largest fine ever paid by a bank.


The scale of dismissals was revealed by the chief executive of the bank's investment arm, Andrea Orcel, as he insisted to a sceptical Banking Standards Commission he was "recovering the honour" of the shamed institution.

Mr Orcel, who was grilled by the commission alongside chief risk officer Philip Lofts and global head of compliance Andrew Williams on the practice of Libor-rigging at the bank, maintained the scandal stemmed from a small subset of traders, and top management was unaware.

"I believe a limited number of people are responsible for what happened at UBS," he said. "People were appalled, upset and angry that their reputation was dragged down by the actions of others."

The trio of top executives said the 18 sackings were of traders found guilty of "reprehensible behaviour" who were still employees of the bank when the scandal broke, but did not put a figure at how many of the 40 culpable staff identified by the FSA remained at the bank.

Parliamentarians on the commission, led by Conservative MP Andrew Tyrie, made clear they were unconvinced the scale of dismissals was significant enough to send shockwaves through the Swiss investment bank, which has 5,500 traders, and which the FSA said allowed "routine, widespread and condoned" Libor-rigging to go undetected for several years.

However Mr Orcel contended the bank's reaction to the scandal had been thorough, saying: "We believe all the people that were involved in Libor and were still at UBS have been appropriately reprimanded, dismissed or penalised. I am absolutely determined and convinced the whole organisation is behind me and we will root it out."

Mr Lofts added the bank is considering buying "more sophisticated surveillance technology" to monitor staff, in addition to efforts to impress ethical standards more strongly on employees.

At times contrite, Mr Orcel, commonly branded as a "deal junkie" for his role in many of Europe's biggest banking deals during his 20-year tenure at Bank of America Merrill Lynch, admitted "we all got too arrogant that things were correct the way they were", saying the industry "needed to change."

Banking commission members voiced scepticism senior management was oblivious to the practice, a claim described as "baffling" by Lord Nigel Lawson.

Mr Williams admitted management had been "ineffective", blaming the complexity of UBS - which underwent a decade of rapid expansion before deciding announcing a major restructure this year - for blinding senior figures to Libor-rigging activities.

UBS has been mired in controversy in recent months after facing a bill three times that of Barclays for its involvement in Libor-rigging, including the FSA's largest every fine of £160m.

Weeks earlier, former UBS trader Kweku Adoboli was jailed for seven years after being found guilty of the biggest fraud in British history, in actions that lost the bank £1.4bn.

Libor is a benchmark interest rate used in transactions worth $500 trillion (£310 trillion) globally.

One UBS manager in October 2008 admitted a single basis point move in Libor – or 0.01pc – would be worth $4m to the bank. UBS began manipulating Libor in early 2005 – with traders making false submissions to the organisations that compiled banks’ offers to set the daily rate.

By 2007, though, UBS’s rigging was industrial in scale – with “illicit fees” paid to brokers that ran into hundreds of thousands of pounds and deals struck with rivals so that everyone would have the chance to cash in.

The scale of the abuse was on a radically different level from that at Barclays, which is why UBS’s £940m fine was more than three times bigger.

Mr Tyrie said at the time of UBS's fine that Libor rigging was "the clearest illustration yet that a great deal more needs to be done to restore standards in banking".

telegraph.co.uk

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