Sunday, December 16, 2012

UBS and RBS Libor settlements show benefit of being owned by taxpayers

Reuters reports that RBS will be fined almost $565 million dollars as part of its Libor settlement.  At the same time, UBS will be fined almost $1.6 billion as part of its Libor settlement.

Given what is known about the extent to which both firms actively manipulated Libor, a benchmark interest rate, it appears that the benefit of having taxpayers owning equity in the bank is $1 billion.

This difference reflects the fact that it is current shareholders who pay the cost for past bad behavior by bankers.

Royal Bank of Scotland (RBS.L: QuoteProfileResearch) is braced for a penalty of more than 350 million pounds ($564 million) for its role in a global interest rate rigging scandal, the Sunday Times newspaper reported, without citing sources. 
The British newspaper said part state-owned RBS is nearing a deal with regulators in Europe and North America over its part in the Libor interest rate rigging scandal, and is expected to agree a settlement early next month.
From the UBS article,

UBS faces a fine of 1.5 billion Swiss francs ($1.63 billion) to settle interest rate rigging charges, a Swiss newspaper reported on Saturday. 
Citing unnamed sources, Tages-Anzeiger daily said the bank would admit 36 traders around the globe manipulated yen Libor between 2005 and 2010. A UBS spokesman declined to comment. 
People familiar with the matter told Reuters on Friday UBS could reach a $1-billion-plus settlement and admit to criminal wrongdoing by its Japanese arm, where one of its traders manipulated yen Libor and euroyen contracts. 
Between 25 and 30 people have left UBS over the matter, the sources said. The Swiss bank had hoped for a softer touch from regulators by cooperating in industry-wide probes and was surprised by the size of the expected settlement, they added.


No comments: