British panel grills UBS executives over rate rigging

LONDON — Senior executives of the Swiss banking giant UBS faced tough questioning from British politicians Wednesday over a recent rate-rigging scandal that led the company to pay $1.5 billion in fines to global authorities.

During almost three hours of testimony, Andrea Orcel, chief executive of UBS’s investment bank, and the firm’s chief risk and compliance officers were questioned over why the illegal activity, conducted over six years through 2010, had not been discovered earlier.

“This scandal which took place at UBS was a shocker of enormous proportions,’’ said Andrew Tyrie, a politician who heads the British Parliament’s commission on banking standards, which is investigating misconduct in the country’s financial services sector.


The fines were levied last month after US, British, and Swiss regulators discovered that about 40 UBS employees had manipulated key benchmark interest rates to portray the bank as being in a healthier financial position than it actually was.

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UBS’s Japanese subsidiary pleaded guilty to fraud charges in the case, which included the manipulation of both the London interbank offered rate, or Libor, and the Euro interbank offered rate, or Euribor. Together, the rates underpin trillions of dollars of financial products worldwide, including sophisticated derivatives and home mortgages.

The US Justice Department has brought charges against two former UBS traders, Thomas Hayes and Roger Darin, over their roles in the illegal activity.

“These are industrywide problems,’’ said Orcel, a deal-making veteran who has advised on some of Europe’s biggest banking takeovers and who joined UBS last year from Bank of America. ‘‘We all got probably too arrogant, too self-convinced that things were correct the way they were. I think the industry needs to change.’’

The British politicians peppered Orcel; Philip J. Lofts, UBS’s chief risk officer; and the firm’s global head of compliance, Andrew Williams, with questions about why the illegal activity had not been discovered despite several internal audits of the bank’s trading activity.


The UBS officials acknowledged that only 18 of the 40 individuals linked to the scandal had been fired because of the illegal activity, although some of the implicated traders moved to other banks before the misconduct was detected.

Some employees connected to the illegal activity remained at the bank, the executives said.