The UBS Libor-Fraud E-mails Are a Gift for Regulators

The documents come as UBS is fined $1.5 billion for rigging Libor rates.
UBS headquarters on Paradeplatz in Zurich Photograph by Adrian Moser/Bloomberg

Just a week before Christmas, the Libor scandal is a gift that keeps on giving. The Swiss bank UBS has been fined $1.5 billion and two of its former traders were charged with conspiracy in the United States, while U.K. regulators released a report (PDF) that captures the bank’s employees engaging in routine, casual, and brazen manipulation of what has been called the world’s most important number.

“Libor” is an acronym for the London Interbank Offered Rate, a key interest rate that affects borrowers, small and large, around the world. It’s a measure of how much banks pay to borrow from each other, as measured and submitted by themselves. That self-reporting aspect makes it ripe for distortion, as banks have sought to adjust it by fractions of a point up or down to eke greater profits out of their trading activities. UBS was far from alone in rigging the numbers—in June, Barclays was fined about $450 million over Libor-fixing allegations, and its chairman, chief executive, and chief operating officer all resigned.

The report on UBS issued on Tuesday by the U.K.’s Financial Services Authority is an incredible document stuffed with colorful interactions among traders, managers, and other bank personnel—and their counterparts at other companies—as they go about skewing Libor numbers to their benefit. Thousands of wrongful requests were made, the regulators say.

On Sept. 18, 2008, according to the FSA transcripts, a trader wrote this to a broker about six-month Libor rates: “if you keep 6s unchanged today … I will f—— do one humongous deal with you … Like a 50,000 buck deal, whatever … I need you to keep it as low as possible … if you do that …. I’ll pay you, you know, 50,000 dollars, 100,000 dollars… whatever you want … I’m a man of my word.”

Earlier, on March 29, 2007, according to the transcripts, a trader asked a manager for low Libor submissions. The manager replied, apparently in pique: “i dun mind helping on your fixings, but i’m not setting libor 7bp away from the truth i’ll get ubs banned if i do that, no interest in that.” (“BP” stands for basis point, or one one-hundredth of 1 percent.) The trader replied that he didn’t want UBS banned, either, but “any help appreciated.” The submission ended up being two basis points less than it should have been. To recap: manipulating Libor by seven basis points is unacceptable; manipulating it by two basis points is far less a problem.

And in July 2009, according to the report, a broker at another firm chatted with a UBS trader about how not to get caught rigging six-month Libor rates—do it gradually, not all at once. He typed: “if you drop your 6M dramatically on the 11th mate, it will look v fishy.” The trader replied: “don’t worry will stagger the drops …”

Brokers and traders refer to themselves and each other as “SUPERMAN,” “HERO,” and “captain caos,” among other nicknames in the transcripts, as they manipulate Libor rates.

The evidence against UBS is strong enough that its Japanese subsidiary pleaded guilty to wire fraud, a rarity in financial enforcement. Banks usually settle charges with a fine and no admission of guilt. Beyond being highly incriminating, the material in the FSA report is embarrassing. As my Bloomberg Businessweek colleague, Karen Weise, advised when she reported in June on the release of another set of damning Libor documents: When participating in a global fraud, don’t talk about it in traceable e-mails.