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UBS Group AG Resolves LIBOR Manipulation Probe, To Pay $68M

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Continuing with the resolution of past misconducts, UBS Group AG (UBS - Free Report) has agreed to resolve a lawsuit that accused it of rigging London Interbank Offered Rate (LIBOR). The interest-rate manipulation by the banking giant had affected trillions of dollars of financial instruments. The company will pay a combined fine of $68 million to settle the case.

Allegations

UBS Group AG had been accused by around 40 states for its fraudulent act against government and non-profit entities. The settlement, announced last week, alleged the bank for misrepresentation of true picture of the benchmark interest rate to state and local governmental, not-for-profit organizations and institutional trading counterparties.

“Manipulative or fraudulent conduct that undermines the integrity of our financial markets will not be tolerated," said Attorney General Underwood. “Our office is committed to holding financial institutions accountable for their misconduct,” he added

UBS group AG has agreed for co-operation and did not admit or deny from wrongdoings.

In a statement, UBS noted, "We are pleased to have resolved this legacy matter related to events that are almost a decade old. It was achieved with the best interests of our shareholders in mind."

LIBOR is a widely accepted benchmark rate. Several financial institutions, mortgage lenders and credit card agencies lay down their own rates in relation to this. Derivatives and other financial products are connected to this rate.

Therefore, manipulation of benchmark interest rates by major financial institutions has triggered thorough investigations by regulatory bodies across Europe, Asia and America. Investigations revealed huge scams, with nearly $300 trillion of loans, mortgages, financial products and contracts being linked to the tampered interest rates.

UBS Group AG’s resolution follows similar settlements with the state attorneys general by three other largest banks, including Citigroup (C - Free Report) , Deutsche Bank (DB - Free Report) and Barclays (BCS - Free Report) , totaling the amount to around $488 million.

Conclusion

Regulatory authorities are investigating the matter and plan to put forward a landmark judgment, in a bid to curb the occurrence of such shrewd practices in future, bring justice to the sufferers, and punish the wrongdoers. While the settlements will put to rest a long-drawn investigation and banks can breathe relief, this comes as a huge blow to their financials. Further, such settlements could be called exemplary and trigger similar cases by other banks depending on the charges.

UBS Group AG has been settling lawsuits and regulatory probes with a goal to focus on core operations. Nonetheless, the banking giant seems to have resolved majority of litigation matters and now intends to strengthen its core business.

Over the past year, the company’s shares have lost around 35.2% compared with the industry’s decline of 22.9%.



Currently, UBS Group AG carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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