UBS, the Swiss banking giant, is close to reaching settlements with U.S. and British authorities over the manipulation of interest rates, the latest case in a multiyear investigation that has rattled the financial industry and spurred a public outcry for broad reform.
UBS is expected to pay more than $450 million to settle claims that some employees reported false rates to increase its profit, according to officials briefed on the matter who spoke on condition of anonymity because the negotiations were private.
If the bank agrees to the deals with various authorities, the collective penalties would yield the largest total fines to date related to the rate-rigging inquiry and would increase the likelihood that other financial institutions would face stiff penalties. Authorities dealt their first blow in the rate-rigging case in June when the British bank Barclays agreed to a $450 million settlement. A spokeswoman for UBS declined to comment. The agencies leading the UBS investigation -- the Commodity Futures Trading Commission, the Justice Department and Britain's Financial Services Authority -- also declined to comment.
The UBS case will provide a window into systemic problems in the rate-setting process, which affects how consumers and companies borrow money around the world. After reviewing thousands of internal bank emails and interviewing dozens of employees, the authorities have uncovered patterns of abuse at the major banks that help set benchmark interest rates.
The sprawling investigation is focused on benchmarks like the London interbank offered rate, or Libor. The rate, a measure of how much banks charge each other for loans, is used to determine the costs of trillions of dollars of mortgages, credit card charges and student loans.
Regulators claim that UBS traders colluded with rival banks to influence rates in an effort to bolster their profits, according to officials briefed on the matter. Some traders at UBS were suspended this year over the matter.
Given the scope of the case, the UBS settlement is expected to heighten the call to change the Libor system. Lawmakers are pushing to change the way banks report rates, providing more transparency to consumers, companies and investors that rely on the benchmark.
Investigators say the broader Libor case could go on for years.
Canadian, Swiss and Asian authorities as well as the Justice Department, the Commodity Futures Trading Commission and Britain's Financial Services Authority are investigating the actions of more than a dozen banks. Along with UBS, the futures commission is focused on potential wrongdoing at two U.S. banks, Citigroup and JPMorgan Chase, the officials said. HSBC is also under scrutiny.