‘$50,000, $100,000 … Whatever You Want’

Photographer: Jason Alden/Bloomberg

'Rush Hour' by George Segal in front of the UBS AG offices.

Swiss bank UBS AG agreed to $1.5 billion in fines in the Libor fixing probe in a settlement with U.K., U.S. and Swiss regulators. To those who’ve been following the probe carefully and know that a settlement of that size has been anticipated for a while that might seem like old news. It’s not.

What makes this different from prior Barclays Plc and HSBC Holdings Plc settlements is that this time we are dealing with bribes of tens or hundreds of thousands of dollars to traders at other banks to manipulate interest rates. In one email, a UBS trader offers “$50,000, $100,000…whatever you want.

In earlier settlements, it was hard to understand just how traders would have made money from the manipulation. The UBS trail is much clearer. There are requests, for instance, for high “6-month fixings” and lower fixings for one and three months. We can deduce here traders were likely betting on the difference between long and short term interest rates. If you want more details, you can get a mountain of them in the original documents from U.K. regulators.

The remaining billion-dollar question here is just who was on the other side of these deals. If UBS traders made money from their humongous (their word!) efforts to manipulate these rates, that means someone else — clients? traders at other banks? — lost it. You can bet that some of those folks will be looking to be made whole in court.