UBS warns of 'material' fine risk in foreign exchange probe

UBS sign Image copyright Reuters
Image caption UBS has already suspended at least five traders in connection with the foreign exchange probe

UBS has warned it could face "material monetary penalties" over allegations it was involved in rigging foreign exchange rates.

The Swiss bank confirmed it was currently in settlement talks with some authorities about the investigation.

It said the talks included findings that UBS did not have adequate controls over its foreign exchange business.

Authorities globally are investigating the possible manipulation of foreign exchange markets.

"The terms proposed include findings that UBS failed to have adequate controls in relation to its foreign exchange business that were adequate to prevent misconduct, and would involve material monetary penalties," UBS said on Monday.

UBS said that other authorities could start settlement talks "in the near future".

Regulators globally have been investigating suggestions that some foreign exchange traders have, for years, colluded in the artificial fixing of rates in the $5.3 trillion-a-day foreign exchange market.

UBS has already suspended at least five traders and approached US authorities last year with information in the hope of gaining anti-trust immunity if charged with wrongdoing.

UBS said on Monday it would continue to take "appropriate action" over personnel in connection with the foreign exchange inquiry.

Share swap

UBS made the admission in a share swap prospectus to its investors. Shareholders are being offered a one-off dividend to swap shares into a new group holding company. The share exchange is part of a reorganisation of the business, to ensure it can more easily be broken up in the event of a crisis.

In addition to creating the Swiss subsidiary, it will create a separately capitalised UK business and a holding company for its US operations.

The revamp is aimed at ensuring that a problem in one of its branches will not spread to the remainder, preventing a repeat of the 2008 financial crisis, when UBS had to be bailed out by taxpayers after losing more than $50bn on US mortgages.

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