In unprecedented move, US voids interest-rigging settlement with UBS: WSJ

The U.S. Justice Department has voided a 2012 settlement with UBS related to interest-rate rigging, the Wall Street Journal reported on Thursday. -- PHOTO: REUTERS
The U.S. Justice Department has voided a 2012 settlement with UBS related to interest-rate rigging, the Wall Street Journal reported on Thursday. -- PHOTO: REUTERS

WASHINGTON (Reuters, AFP) - The U.S. Justice Department has voided a 2012 settlement with UBS related to interest-rate rigging, the Wall Street Journal reported on Thursday.

The unprecedented move to void a settlement with a major financial institution comes after more than a year of talks between UBS and the Justice Department, the newspaper said, citing current and former government officials.

It is a sign of the department's increasingly aggressive negotiating posture with financial institutions, and calls into question the staying power of past bank settlements if they run into trouble, the paper noted.

The ongoing negotiations were expected next week to result in UBS paying a fine of about US$200 million and pleading guilty to allegations that UBS traders manipulated the London interbank offered rate, or Libor, before 2012.

The sprawling forex probe has ensnared most large banks and centered on accusations traders conspired through instant messages and online chats to manipulate the market in ways that cheated clients and bolstered their own profits.

UBS is one of five major banks that are expected to settle with US and British authorities next week for their role in rigging the massive foreign exchange market. The other banks are JP Morgan Chase, Citigroup, British banks Barclays and Royal Bank of Scotland.

The five banks face fines of up to $1 billion, according to the degree of their involvement in the fraudulent activity. The Justice Department has also been pushing for guilty pleas as part of the settlement. A guilty plea typically restricts a bank's operations in the US, but regulators have been working on waivers to ensure customers are not harmed, a person familiar with the matter said.