LONDON — The Swiss financial giant UBS is close to finalizing a settlement with authorities over the manipulation of interest rates, a deal that is expected to include at least $1 billion in fines.
UBS is in discussions with US, British, and Swiss authorities, and an announcement could come as early as Monday, said people briefed on the matter who spoke on the condition of anonymity.
The settlement would be a big win for authorities in the global rate-rigging investigation. The UBS penalty would represent the largest total penalty in the inquiry. In June, the British bank Barclays agreed to pay $450 million to settle accusations that it reported false rates for financial gain.
A spokesman for UBS declined to comment. The British Financial Services Authority and the Swiss Financial Market Supervisory Authority also declined to comment.
Global authorities are fast-tracking several civil and criminal cases in connection to the manipulation of benchmark rates, including the London interbank offered rate, or Libor. The benchmark rate underpins trillions of dollars of financial products, including mortgages, student loans, and credit cards.
The industry fallout could be significant. The Royal Bank of Scotland has indicated that it could announce penalties before its next earnings release. Deutsche Bank also has set aside money for potential fines.
On Tuesday, Britain’s Serious Fraud Office arrested three men in connection with the Libor case. Thomas Hayes, a 33-year-old former trader at UBS and Citigroup, was among the individuals rounded up by the police in a predawn raid at his home on the outskirts of London, according to people with knowledge of the matter. The three men, including two who worked at the British brokerage firm RP Martin, were released on bail the same day.
Hayes is expected to be a central figure in the case against UBS. Swiss authorities are expected to settle accusations that Hayes and other employees colluded with other banks to influence the direction of interest rates, as part of a broader scheme to increase their trading profits. Some of the UBS traders have been suspended or fired over the matter.
Hayes, who began his career at the Royal Bank of Canada, made his mark as an interest rates trader at UBS, a person briefed on the matter said. He worked at UBS’s Tokyo office from 2006 to 2009 before departing for Citigroup. But Citigroup fired Hayes the next year, for approaching a trading desk about influencing rates, and the bank reported his actions to regulators.