Investigations into potential Libor rigging at UBS (Berlin: UBRA.BE - news) have widened to Hong Kong after the Swiss bank admitted fraud, agreed to pay £940m in fines for manipulating the inter-bank rate, and saw two of its traders charged with conspiracy.
The Hong Kong Monetary Authority, the central bank, launched an inquiry into UBS after receiving information from overseas regulators about “possible misconduct” related to the local inter-bank rate, Hibor, and other Asian reference rates.
HKMA said it was looking into whether there had been “any material impact on Hibor” and that it would work with foreign regulators to “consider further actions that need to be taken”. HKMA deputy chief executive Arthur Yuen said the issue seemed to be potential misconduct by staff rather than a problem with the bank’s systems.
A Hong Kong investigation into UBS raises the threat of fines and sanctions in Asia for more than a dozen banks caught up in the Libor scandal, as well as years more of inquiries. So far, only UK, US and Swiss regulators have fined UBS and Barclays (LSE: BARC.L - news) for their roles in attempting to rig the market.
The investigations have led to criminal charges and arrests in the US and UK that could develop into another extradition battle, like those over computer hacker Gary McKinnon and the NatWest Three.
Tom Hayes, a former UBS trader who is a British national, was arrested by the Serious Fraud Office and the City of London (LSE: CIN.L - news) police last week but released without charge. On Wednesday, he was charged in the US with “wire fraud”. Lanny Breuer, assistant attorney general at the US Department of Justice, said the US would seek his extradition.
UK bankers appear to be as offended by the abuse as the public. According to a survey by Lansons Communications/Owen James, a majority of bankers would like to see those responsible for Libor rigging jailed. Some 35 of 68 “senior bankers and executives” interviewed called for prison terms.
Although UBS’s fine was the second largest in history, experts said banks should also be banned from markets where the abuse was conducted. Pete Hahn, a professor at Cass Business School, said: “The absurdity is that those banks that did not offend almost look as if they missed opportunities. This is wrong and the reward has to go to the better participants. Is it time to think about denying permission and licenses or closing offenders rather than the fines?”