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Hong Kong Monetary Authority (HKMA)

Monetary Authority investigates UBS over possible Hibor rate misconduct

Day after US$1.5b in fines over Libor scandal, the Swiss bank faces HKMA investigation

PUBLISHED : Friday, 21 December, 2012, 12:00am
UPDATED : Friday, 21 December, 2012, 4:33am

Hong Kong's de facto central bank said it has begun investigating UBS for possible misconduct involving the setting of the city's interbank interest rate, raising fresh concerns that the Swiss bank faces more trouble.

The statement comes just a day after UBS agreed to pay US$1.5 billion in fines for its role in a scandal involving the London interbank offered rate (Libor).

The Hong Kong Monetary Authority said yesterday it was investigating the Hong Kong interbank offered rate (Hibor) submitted by UBS after receiving information from overseas regulators. It said it was "accessing whether the misconduct, if substantiated, has any material impact on the Hibor fixing results".

In a statement, the authority said the regulatory information also pertained to "other reference rates in this region".

David Webb, a shareholder activist and former investment banker, said: "If the Hibor rate was manipulated downward, residential Hibor-linked mortgage borrowers in Hong Kong would have benefited from the interest-rate manipulation, and vice versa."

He noted UBS was not the only bank involved in the interest-rate rigging scandal in the UK.

The Hong Kong interbank lending rate serves as a benchmark for a range of products, including household mortgages and complicated financial derivatives. The rate is used in contracts ranging from overnight to a 12-month period.

On Wednesday, UBS agreed to pay financial penalties and admitted fraud after a global investigation showed its staff engaged in the manipulation of interbank lending rates spanning three continents. The penalty agreed with US, UK and Swiss authorities is more than three times the US$450 million fine levied on Barclays in June for its role in the rigging of Libor, a benchmark for more than US$300 trillion of financial products worldwide. Two former UBS traders face criminal charges by US prosecutors.

Following yesterday's HKMA announcement, Mark Panday, a Hong Kong-based spokesman for UBS, said: "We continue to work closely with various regulatory authorities to resolve issues relating to the setting of certain global benchmark interest rates. As we are currently in active discussions with these authorities, we cannot comment further."

In late November, the Hong Kong Association of Banks, an industry body, proposed increasing market transparency and reducing the number of maturities in the city's interbank reference rates market following the price-rigging scandal in London.

Apart from Hong Kong, the Monetary Authority of Singapore (MAS) said its central bank was still conducting a review into how banks, including UBS, had set rates in Singapore.

"The reviews are ongoing, and it is premature to speculate on the outcome of these reviews at this stage," an MAS spokeswoman said in a statement.