For Switzerland’s largest bank, the hits just keep coming. After years of being whacked with millions of dollars of fines for all sorts of infractions, UBS now appears to be at the center of the financial world’s latest scandal: an alleged conspiracy by traders and brokers to rig the price of derivatives around the world by manipulating a key interest rate.
The Wall Street Journal reports that UBS has admitted to Canadian regulators that between 2007 and 2010, some of its traders and cash brokers conspired to manipulate the London interbank offered rate, also known as Libor. This is the rate that banks use to lend to each other, and it is essentially the backbone of half the world’s fixed-income market, because it’s also used to calculate the price of trillions of dollars of floating-rate securities every day, from car loans to corporate bonds and derivatives.
By allegedly conspiring to set Libor rates, traders and cash brokers appear to have been able to profit off of derivatives linked to it. Bloomberg News reports that UBS recently suspended a number of senior executives and traders in conjunction with the investigation.