Libor Manipulation Examined by Swiss Regulator Targets UBS, Credit Suisse

By Elena Logutenkova - Feb 3, 2012 6:29 PM GMT+0700

UBS AG (UBSN) and Credit Suisse Group AG (CSGN) are among 12 banks facing a Swiss inquest into possible manipulation of the London interbank offered rate, the latest probe into how the benchmark for $350 trillion of financial products is set.

“Collusion between derivative traders might have influenced” Libor and its Japanese equivalent, Tibor, the Swiss competition watchdog, Comco, said in an e-mailed statement today. “Market conditions regarding derivative products based on these reference rates might have been manipulated too.”

Comco said it opened the investigation after receiving an application for its “leniency program,” which indicated that traders from various banks might have influenced the rate. Libor is set daily by the British Bankers’ Association based on data from banks, which report how much it would cost them to borrow from each other for various periods of time. Regulators in the U.S., U.K. and European Union have been examining how Libor is set, while Japan’s securities watchdog has probed Tibor.

“We are taking these investigations very seriously and are fully cooperating with the authorities,” said Yves Kaufmann, a spokesman for UBS in Zurich. UBS, the biggest Swiss bank, said in July that it was granted conditional immunity from some agencies, including the U.S. Department of Justice.

A spokesman for Credit Suisse said the bank is “not in the position” to comment at the moment.

‘Influencing Rates’

Other banks under investigation include Bank of Tokyo- Mitsubishi UFJ Ltd., Citigroup Inc. (C), Deutsche Bank AG (DBK), HSBC Holdings Plc (HSBA), JPMorgan Chase & Co., Mizuho Financial Group Inc. (8411), Rabobank International, Royal Bank of Scotland Group Plc (RBS), Societe Generale SA and Sumitomo Mitsui Banking Corp., according to the statement. “Other financial intermediaries” are also subject to the investigation, Comco said.

Press officers for Deutsche Bank, Mizuho, Bank of Tokyo, JPMorgan and HSBC declined to comment. Spokespeople for Sumitomo Mitsui, RBS and Citigroup couldn’t immediately comment. Rabobank spokesman Hendrik Jan Eijpe said he couldn’t comment as the Dutch lender hasn’t yet received any communication from the Swiss competition commission.

“Societe Generale (GLE) is part of a number of panels which determine interbank rates,” the Paris-based bank said in a statement read over the phone by spokeswoman Saphia Gaouaoui. “The bank is prepared to respond to any enquiry from relevant authorities on any information they should wish to obtain.”

Derivative traders working at various financial institutions might have manipulated Libor and Tibor submissions by “coordinating their behavior, thereby influencing these reference rates in their favor,” the watchdog said. “Derivative traders might have colluded to manipulate the difference between the ask price and the bid price of derivatives based on these reference rates to the detriment of their clients.”

Request for Information

The involved banks were sent a letter yesterday with a request for information on the alleged collusion, Thomas Nydegger, an official at Comco dealing with competition in services industries, said by telephone. The banks were given a deadline of the beginning of March, which may be extended if needed, he said.

Comco aims to assess the effects of the alleged practices on Swiss clients and companies, Nydegger said, adding that there is no legal basis for cooperation between authorities in different countries on such investigations. The probe may take more than a year to conclude, he said.

Banks including RBS, Barclays Plc and HSBC were asked last year to supply information to U.S. and European regulators investigating whether Libor was manipulated.

‘Intensifying Scrutiny’

European Commission regulators also raided banks that offer financial derivatives linked to the euro interbank offered rate, or Euribor, over possible collusion. Deutsche Bank and RBS were visited by EU officials, two people said in October.

EU regulators are “intensifying our antitrust scrutiny on wholesale financial markets,” EU Competition Commissioner Joaquin Almunia said last month. “Preserving competition in this domain is of utmost importance and we will live up to our responsibilities in this regard.”

Antoine Colombani, a spokesman for the European Commission in Brussels, declined to comment on the Swiss investigation.

“Last October we carried out unannounced inspections at the premises of a number of undertakings active in the sector of euro interest rate derivatives based on Euribor benchmark rates,” he said in an e-mail. “At this stage no formal investigation has been opened.”

Japan’s banking regulator declines to comment on the actions of foreign authorities, said Toshiharu Mashita, a spokesman for the country’s Financial Services Agency.

To contact the reporter on this story: Elena Logutenkova in Zurich at elogutenkova@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net