A sole UBS trader used a combination of bribery, flattery and fictitious trading to rig the price of money over three years, regulatory filings show.
The employee, only identified by regulators as “Trader A,” colluded with brokers, counterparts at other firms and his colleagues to influence yen Libor, which reflects how much banks charge each for loans in the Japanese currency, the U.K.’s Financial Services Authority said. E-mails published by the regulator today show he paid brokers hidden fees through phoney trades and offered to compensate colleagues and competitors for acquiescing to his requests.
“If you keep 6s unchanged, I will f—–g do one humongous deal with you,” he told a broker on Sept. 18, 2008, referring to six-month yen Libor. “If you do that … I’ll pay you, you know, $50,000, $100,000… whatever you want … I’m a man of my word,” according to a transcript of a call regulators released.
UBS was today fined 1.4 billion Swiss francs ($1.5 billion) by U.S., U.K. and Swiss regulators for trying to rig global interst rates. By colluding with other firms, the UBS employee “significantly” increased the risk that the Libor rate published had been manipulated, regulators said.
About 40 individuals at the bank, including 11 managers, sought to manipulate the rates. At least two further managers and five senior managers were aware of the practice, the FSA said. Most of the internal requests, all of the requests to other banks and almost all the negotiations with brokers were made by Trader A, according to the Swiss Financial Market Supervisory Authority.
The UBS settlement shows how a handful of individuals, seeking to profit from bets on derivatives, could manipulate benchmark rates such as Libor which is used to set interest payments on $300 trillion of securities from mortgages to student loans, as well as Euribor, the Euro interbank offered rate.