UBS Group AG is expected to plead guilty on charges of manipulating foreign currencies and rigging the benchmark interest rates. However, UBS’ plea is believed to be only the beginning, as the Justice Department is also in settlement talks with four other major banks.
U.S. regulators are in the process of hearing guilty pleas from five of the largest banks in the world. Besides UBS, there are also JPMorgan Chase, Citigroup, Barclays and Royal Bank of Scotland involved, all of them standing accused of an array of antitrust and currency rigging charges. The U.S. Justice Department is expected to make an announcement next week, revealing the terms of each settlement.
The Justice Department will decide not only how much the banks will have to pay for their misconduct, but also if they will be allowed to operate on U.S. territory in the future. Except for UBS, the giants will probably get off easy, and a collective several million dollar fine will have to make do.
But things won’t go as easy for UBS, analysts believe. The bank has just been pardoned recently by the Justice Department, for its role in the 2012 manipulation of London’s interbank rates. UBS vowed not to break the law again, and in return prosecutors agreed not to press charges against the group.
In the current context, however, prosecutors seem ready to argue that UBS broke the December 2012 agreement, and many experts believe the Justice Department will not settle for the (estimated) 500 million dollars fine only. UBS could be forced to operate under federal supervision from now on, at least for a while.
So far, there are only speculations on the latter issue, as neither party denied or confirmed anything. Both UBS spokeswoman Karina Byrne and Justice Department official Peter Carr refrained from making any comments in the press.
There is a serious possibility that UBS will get away again with only paying the fine. Prosecutors are reluctant to impose harsh penalties on five of the world’s biggest banks, as they are an essential part of the economy, not only in the U.S., but globally. The punishment that is currently on the table is more of a symbolic nature, showing that the Justice Department does not tolerate such grave acts of misconduct. But beyond that, life might go on as usual for the financial giants.
Technically, we might be witnessing a case of five convicted felons being allowed to conduct their businesses unhindered once they pay the federal authorities some money. In truth, the fine will hurt the fortunes of the banks very little. What really would have impaired their activity is barring them from certain business practices. According to sources with knowledge on the case, the banks’ lawyers are all in Washington, seeking reassurance that this will not be the case.
As far as it goes for the Justice Department’s promise to crack down on financial misconduct, reaching settlements with the five banks is not really the convincing step expected by some people. However, there are certain signs that on this occasion the banks are taking prosecutors threats more seriously than before. For instance, there were no subsidiaries of the banks involved in the negotiations, as all guilty pleas were made by the parent companies.
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