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Swiss watchdog orders UBS payment, bonus curbs in forex probe

* Regulator orders UBS (NYSEArca: FBGX - news) to hand over 134 mln Sfr

* Proceedings begun against 11 current and ex-UBS staff

* Limits bonuses for some staff to 200 pct of base pay (Adds ceo, regulator comment, detail)

ZURICH, Nov 12 (Reuters) - UBS tried to manipulate foreign exchange benchmarks and staff acted against clients interests, the Swiss watchdog said on Wednesday, ordering the bank to hand over 134 million Swiss francs ($139.08 million) in a forex probe.

The regulator's ruling formed part of a global investigation into forex trading, which has resulted in $3.4 billion in penalties on five major banks over allegations of price fixing in the currency market.

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The watchdog, which this year appointed ex-UBS banker Mark Branson as its head, said its investigation found risks at UBS's forex division were heightened by the incentive system in which bonuses were on average triple the basic salary.

"The unacceptable behavior revealed by the investigation violated rules against manipulative conduct, as well as the duty to safeguard client interests and to comply with internal directives," it said in a statement.

The payment ordered by the Swiss regulator is bigger than the 59 million francs in profits demanded in 2012 to settle a case over the rigging of the London Interbank Offered Rate.

UBS Chief Executive Sergio Ermotti said the resolutions with regulators were an important step towards closing this industry-wide matter for UBS. "We continue to cooperate with related ongoing investigations," he said in a statement.

The Swiss watchdog said it would limit variable compensation for UBS's forex and precious metals employees globally to 200 percent of their basic salary for two years. The regulator will introduce an approval process for other high earners at UBS's Swiss investment bank.

The regulator also said it had found serious misconduct by UBS employees in precious metals trading as part of its investigation. It has begun enforcement proceedings against 11 former and current unnamed UBS employees.

UBS is also obliged to automate at least 95 percent of its global foreign exchange trading. A source familiar with the matter said roughly 90 percent of UBS's forex trading is currently automated.

The regulator said investigations of three other Swiss banks, which Switzerland's competition commission in March disclosed as Credit Suisse (NYSE: CS - news) , Julius Baer (Other OTC: JBARF - news) and local government-backed Zuercher Kantonalbank, were concluded without any enforcement.

Spokesmen for Credit Suisse and Julius Baer declined to comment; ZKB was not immediately available for comment. (1 US dollar = 0.9635 Swiss franc) (Reporting by Joshua Franklin and Katharina Bart. Editing by Jane Merriman)