CFTC orders UBS to pay $700 million for manipulating Libor

CFTC action part of overall $1.5 billion fine

The U.S. Commodity Futures Trading Commission (“CFTC”) announced an Order today against UBS AG and UBS Securities Japan Co., Ltd. (together “UBS” or the “Bank”), bringing and settling charges of manipulation, attempted manipulation and false reporting of certain global benchmark interest rates.  These benchmarks, which are enormously significant to the American public and to financial markets, are the basis for hundreds of trillions of dollars of swaps transactions, commercial and consumer loans, futures contracts, and other financial derivatives products traded in over-the-counter markets and exchanges around the world.  The Order requires UBS to pay a $700 million civil monetary penalty, cease and desist from further violations as charged, and take specified steps to ensure the integrity and reliability of its LIBOR and other benchmark interest rate submissions and improve related internal controls. (This was part of a larger joint fine levied by numerous regualtors).

In summary, CFTC’s Order finds:

  • For at least six years UBS regularly tried to manipulate multiple benchmark interest rates for profit, and at times succeeded in manipulating the official fixing of Yen LIBOR;
  • More than 2,000 instances of unlawful conduct involving dozens of UBS employees, colluding with other panel banks, and inducing interdealer brokers to spread false information and influence other banks; and
  • UBS made false U.S. Dollar LIBOR and other submissions to protect its reputation during the global financial crisis.

“As our action today makes clear, when a major bank brazenly games some of the world’s most important financial benchmarks, the CFTC will respond with the full force of its authority,” said David Meister, the CFTC’s Director of Enforcement.  “The American public, as well as people and companies around the globe, rely on interest rate benchmarks every day for mortgages, loans and other transactions, trusting that the underlying benchmark rates are honest.  Market integrity is seriously compromised where, as here, a bank spins its rate submissions to boost trading profits, pays off a network of brokers to disseminate false rate information, or makes false submissions to protect its reputation.”

According to the Order, from at least 2005 to at least 2010, UBS engaged in two overarching courses of unlawful conduct that undermined the integrity of the London Interbank Offered Rate (“LIBOR”), the Euro Interbank Offered Rate (“Euribor”), the Euroyen Tokyo Interbank Offered Rate (“Euroyen TIBOR”), and other interest rate benchmarks.  Each of these benchmarks is supposed to reflect or relate to the true costs of borrowing unsecured funds in the relevant interbank market, and as demonstrated by the CFTC’s Order, during the relevant period, UBS’s submissions for these benchmark interest rates often did not.

Specifically, today’s enforcement action states:

  • From at least January 2005 to at least June 2010, acting through more than three dozen employees around the world including a number of senior managers, UBS attempted to manipulate these benchmarks in UBS’s favor, to enhance the profits the Bank earned from trading benchmark-based derivatives.  UBS regularly, and for certain benchmarks sometimes daily, made false rate submissions.  Moreover, with respect to Yen LIBOR and Euroyen TIBOR, UBS colluded with at least four other panel banks to make false submissions, and induced at least five interdealer brokers to disseminate false information or otherwise influence other panel banks’ submissions.  The Order also finds that UBS sometimes successfully manipulated the official fixing of Yen LIBOR.


  • From August 2007 through mid-2009, during the global financial crisis, UBS managers directed that the Bank’s U.S. Dollar LIBOR and certain other submissions be tailored to protect the Bank’s reputation and avoid what it perceived to be unfair speculation about its fundraising ability and creditworthiness.  The first wrongful direction was for the submissions to “err on the low side.” Later, the directions were revised to place UBS in “the middle of the pack” of panel bank submissions.  According to the Order, these directions, at times, caused UBS’s U.S. Dollar LIBOR and other benchmark submissions to be knowingly false.

UBS engaged in all of this misconduct even after it was on notice in October 2008 of the CFTC’s investigation of UBS.  The Order finds that the conduct came to light only after UBS began an internal inquiry upon the request of the CFTC in April 2010.  The unlawful conduct by UBS is described in more detail below.  Attached to this release are excerpts of quotations from the numerous UBS communications evidencing the unlawful conduct.

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