Hayes prosecution wraps up with UBS Libor-rigging announcement

Court hears bank’s £160 million rate-rigging penalty notice


The prosecution in the case of former UBS and Citi trader Tom Hayes wrapped up its case in Southwark Crown Court in London today (July 6), presenting the court with details of the fine imposed on UBS by the UK's financial regulator in 2012.

The penalty notice issued by the UK's Financial Services Authority (FSA, since replaced by the Financial Conduct Authority and the Prudential Regulation Authority) detailed repeated failures in processes and controls that allowed the manipulation of the London interbank offered rate (Libor) between January 1, 2005 and December 31, 2010.


The conspiracy to manipulate the benchmark, which is linked to the value of trillions of dollars' worth of financial products, involved more than 40 traders and senior managers, the regulator said.

Former UBS trader Tom Hayes is charged with eight counts of conspiracy to defraud. Earlier in the trial the prosecution described how Hayes enlisted the help of brokers to influence other Libor submitters' rate fixings with a series of "bribes". Hayes has pleaded not guilty to all the charges.

The FSA ultimately fined UBS £160 million for its role in the benchmark manipulation. By agreeing to settle the penalty early in the FSA's investigation the Swiss banking giant paid a reduced penalty from the original £200 million.

The notice detailed how UBS had breached two principles in the FSA's Principles for Business by "failing to maintain proper standards of market conduct" and through repeated failures in its risk management systems around its Libor submissions.

The report detailed how joint trader-submitters at UBS "routinely took the positions of its interest rate derivatives traders into account" when submitting Libor for multiple currencies, including the yen Libor which Hayes stands accused of manipulating.

And the court heard that the FSA judged UBS to have no systems or controls in place at all around its Libor submissions between January 1, 2005 and August 7, 2008.

Even after two reviews into Libor submissions in 2008 and 2009, processes remained "inadequate", the FSA wrote.

Hayes's lawyers are now expected to begin laying out the case for his defence.

The trial continues.

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