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UBS Board of Directors authorizes settlements of LIBOR-related claims with US and UK authorities; Swiss regulator to issue

  UBS Board of Directors authorizes settlements of LIBOR-related claims with
  US and UK authorities; Swiss regulator to issue order

  * UBS agrees to pay approximately CHF 1.4 billion^1 in fines and
    disgorgement to US, UK and Swiss authorities to resolve LIBOR-related
  * As part of a proposed agreement with the US Department of Justice (DoJ),
    UBS Securities Japan Co. Ltd. (UBSSJ) has agreed to enter a plea to one
    count of wire fraud relating to the manipulation of certain benchmark
    interest rates, including Yen LIBOR.
  * UBS is making progress in risk-weighted assets (RWA) reduction in the
    fourth quarter and expects its fully applied Basel III common equity tier
    1 ratio to be roughly in line with the third quarter's level of 9.3%^2,
    and net new money in UBS’s wealth management businesses is expected to be
  * UBS believes its fourth quarter net profit attributable to shareholders
    will show a loss, primarily as a result of provisions for litigation and
    regulatory matters.

Business Wire

ZURICH & NEW YORK & LONDON & TOKYO -- December 19, 2012

Regulatory News:

UBS AG (NYSE:UBS)(SWX:UBSN) announced today that its Board of Directors has
authorized settlements with the US Department of Justice (DoJ) and Commodity
Futures Trading Commission (CFTC) in connection with their investigations of
benchmark interest rates. The proposed settlement with the CFTC is subject to
the Commission’s approval. UBS has reached a settlement with the UK Financial
Services Authority (FSA) concerning its investigation. The Swiss Financial
Market Supervisory Authority (FINMA) will also issue an order concluding its
formal proceedings with respect to UBS.

UBS agrees to pay a total of approximately CHF 1.4 billion in fines and
disgorgement. UBS will pay GBP 160 million in fines to the FSA and CHF 59
million as disgorgement of estimated profits to FINMA. The Board has
authorized a payment of fines totaling USD 1.2 billion to the DoJ and CFTC,
and expects those authorities to make further announcements later today. These
monies would be paid according to specified payment schedules.

The conduct described in the settlements includes the following:

  * Certain UBS personnel engaged in efforts to manipulate submissions for
    certain benchmark rates to benefit trading positions;
  * Certain employees at the bank colluded with employees at other banks and
    cash brokers to influence certain benchmark rates to benefit their trading
    positions; and
  * Certain personnel gave inappropriate directions to UBS submitters that
    were in part motivated by a desire to avoid unfair and negative market and
    media perceptions during the financial crisis.

The conduct encompassed by the settlements includes Yen LIBOR, GBP LIBOR, CHF
LIBOR, Euro LIBOR, USD LIBOR, Euribor and Euroyen TIBOR, although the nature
and extent of the conduct in question varied significantly from one currency
to another.

The Board of UBS Securities Japan Co. Ltd., (UBSSJ) has authorized UBSSJ to
enter a plea to one count of wire fraud relating to the manipulation of
certain benchmark interest rates, including Yen LIBOR. The Board of UBS AG has
authorized the firm to enter into a Non-Prosecution Agreement (NPA) with DoJ
relating to UBS AG and all of its subsidiaries and affiliates, except for

Today’s resolutions stem from industry-wide investigations into the setting of
certain benchmark rates across a range of currencies. These investigations
have focused on whether there were improper attempts by banks, either acting
on their own or with others, to manipulate LIBOR and other benchmark rates at
certain times.

UBS has fully cooperated with the authorities in their investigations and
significantly enhanced its control framework for its submissions process for
LIBOR and other benchmark interest rates. The investigations by other
governmental authorities and private litigation referred to in our third
quarter 2012 report remain ongoing notwithstanding today’s announcements.

UBS CEO Sergio Ermotti said: “During the course of these investigations, we
discovered behavior of certain employees that is unacceptable. Their
misconduct does not reflect the values of UBS nor the high ethical standards
to which we hold every employee. We have cooperated fully with the authorities
and taken decisive and appropriate actions to correct the issues and to
strengthen our control processes and procedures. We deeply regret this
inappropriate and unethical behavior. No amount of profit is more important
than the reputation of this firm, and we are committed to doing business with

UBS Chairman Axel Weber said: “The Board and I have zero tolerance for
inappropriate and unethical behavior of any of our staff. We appreciate that
the authorities have recognized UBS for the thoroughness of our investigation
and our exceptional cooperation. We are pleased that the authorities gave us
credit for the important and positive changes we have already made. Our
credibility with clients, investors and employees is critical and therefore we
have to continue to strengthen the firm's operations, culture and awareness of

Despite the expected payments announced today, UBS remains one of the best
capitalized banks in the world.

Based on business activity through the date of this announcement, UBS believes
its fourth quarter net profit attributable to shareholders will show a loss in
the approximate range of CHF 2.0 to 2.5 billion, primarily as a result of:
total provisions for litigation and regulatory matters, (including the LIBOR
settlements, claims related to sales of residential mortgage backed-securities
(RMBS) and other matters), of approximately CHF 2.1 billion; restructuring
charges of approximately CHF 0.5 billion; and an own credit loss on financial
liabilities designated at fair value of approximately CHF 0.4 billion. On an
adjusted basis, we expect to report a pre-tax profit in the approximate range
of CHF 2.5 to 3.0 billion for the year^3. Because the quarter has not yet
ended, the above estimates are subject to variability due to market movements
(including those relating to own credit) and other factors, and in the case of
after-tax estimates are subject to tax computations.

We are encouraged by the progress we have seen in the quarter to date on both
RWA reduction and balance sheet deleveraging. Net new money is expected to be
positive in the quarter as we have seen good flows in our Wealth Management
and Wealth Management Americas businesses, while we have seen net outflows in
Global Asset Management. Our Basel III phase-in common equity tier 1 ratio is
expected to improve to around 14% by quarter-end and our fully applied Basel
III common equity tier 1 ratio, inclusive of the effects from early adopting
IAS 19R in the fourth quarter, is expected to be roughly in line with the
third quarter's level of 9.3%.

For more information, see:

Cautionary Statement Regarding Forward-Looking Statements

This release contains statements that constitute "forward-looking statements".
While these statements represent UBS's expectation concerning the development
of its business and its fourth quarter 2012 results, a number of factors,
including market developments, quarter-end adjustments and accounting
determinations, could cause actual results to differ materially from UBS's
expectations. In addition, these results could depend on other factors that we
have previously indicated could affect our business and financial performance
which are contained in our past and future filings and reports, including
those filed with the SEC. More detailed information about those factors is set
forth in documents furnished by UBS and filings made by UBS with the SEC,
including UBS's Annual Report on Form 20-F for the year ended 31 December
2011. UBS is not under any obligation to (and expressly disclaims any
obligation to) update or alter its forward-looking statements, whether as a
result of new information, future events or otherwise

^1 Based on currency rates as of 6pm Zürich time on 18 December 2012.

^2 The calculation of our pro-forma Basel III RWA combines existing Basel 2.5
RWA, a revised treatment for low-rated securitization exposures which are no
longer deducted from capital but are risk-weighted at 1250%, and new
model-based capital charges. Some of these new models still require regulatory
approval and therefore our pro-forma calculations include estimates (discussed
with our primary regulator) of the effect of these new capital charges which
will be refined as models and the associated systems are enhanced.

^3 Excluding the following items: an own credit loss on financial liabilities
designated at fair value of approximately CHF 2.2 billion; a net restructuring
charge of approximately CHF 0.6 billion; impairment losses of approximately
CHF 3.1 billion on goodwill and other non-financial assets in the Investment
Bank; a credit to personnel expenses related to changes to our Swiss pension
plan of approximately CHF 0.5 billion; a credit to personnel expenses related
to changes to a US retiree medical and life insurance benefit plan of CHF 0.1
billion; a credit to personnel expenses related to the early adoption of IAS
19 (revised) Employee Benefits of approximately CHF 0.3 billion.


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