UBS to RBS Said to Discuss Swiss Franc Libor Fines With EU

Jan 22, 2014 1:42 pm ET

(Updates with comment from financial academic in fourth paragraph.)

Jan. 22 (Bloomberg) -- UBS AG and JPMorgan Chase & Co. are among at least four banks in talks to settle a third European Union probe into derivatives linked to benchmark rates such as Libor, according to three people familiar with the case.

Credit Suisse Group AG and Royal Bank of Scotland Group Plc are also negotiating an accord with EU antitrust officials related to the Swiss franc Libor rate, said the people, who asked not to be named because the discussions are private. EU cartel settlements typically involve an admission of liability and fines.

Total penalties for rigging benchmarks linked to the London interbank offered rate reached $6 billion in December when the EU fined six companies, including Deutsche Bank AG, a record 1.7 billion euros ($2.3 billion). The industry remains the subject of several EU cases including the Swiss franc probe, a preliminary investigation into potential manipulation of foreign-exchange markets and another case involving credit derivatives trading.

“I think it’s increasingly clear now that all sides in these investigations are keen to reach some kind of a deal,” said Richard Reid, a research fellow for finance and regulation at Scotland’s University of Dundee. “The banks see it in their interests to try to reduce the level of regulatory uncertainty by drawing a line under such matters and concentrate on rebuilding their franchises.”

RBS Settlement

Regulators have been scrutinizing suspected manipulation of Swiss franc Libor rates across the world and the Swiss Competition Commission is also looking into the matter. An EU settlement in the probe could be reached as soon as the end of July, the people said.

Officials at Credit Suisse, RBS and JPMorgan declined to comment as did Serge Steiner, a spokesman for UBS. Antoine Colombani, an EU spokesman in Brussels, declined to comment beyond saying that the EU investigation is ongoing.

RBS last year reached a settlement with the U.K. Financial Services Authority that mentioned interbank coordination between traders active in the derivatives market for Swiss franc Libor.

Parallel Probes

The EU’s Swiss franc Libor investigation added to parallel probes into benchmarks linked to the Japanese currency and the euro which yielded settlements -- and the EU’s first fines -- last month.

Deutsche Bank was fined the largest amount -- 725 million euros -- for infringements in both these cases. RBS, JPMorgan, Societe Generale SA, Citigroup Inc. and brokerage RP Martin Holdings Ltd. were also fined.

Zurich-based UBS and London-based Barclays Plc escaped penalties in these two probes because they were the first to inform the EU of the respective cartels.

Any fines in the Swiss franc Libor probe from the EU will likely be smaller than in the Euribor and yen Libor investigations due to the size of the market, according to two of the people.

New York-based JPMorgan, HSBC Holdings Plc and Credit Agricole SA pulled out of negotiations to settle the Euribor portion of last month’s case and still face formal EU complaints over the issue.

A fifth bank may also be involved in the Swiss franc negotiations, two of the people said, and there is a chance that the EU may be forced to enter into separate deals in the probe.

--With assistance from Jim Brunsden in Brussels. Editors: Anthony Aarons, Peter Chapman