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UBS Libor 'chats were company policy'

From BBC - January 2, 2018

Practices for which some traders have been prosecuted, jailed or banned were company policy at the Swiss bank UBS, a court has heard.

UBS staff were expected to take into account the bank's commercial interests when setting the benchmark Libor rate, the High Court was told.

Lawyers for former trader Arif Hussein cited evidence to support that claim.

They are seeking to overturn a Financial Conduct Authority decision to ban him from the industry.

The regulator, the Financial Conduct Authority, claimed it was "obvious" that the bank should not take into account the bank's commercial interests when setting Libor.

'Doing his job'

But lawyers for Mr Hussein said there was evidence to show bosses directed staff to do precisely that as part of best commercial practice - and that Mr Hussein, a junior trader at the bank, was in fact doing as instructed.

"He was doing precisely what he believed he was expected to do. There is no hint of subterfuge or dishonesty. This is a man who was doing his job diligently down to the very last minute," Sara George of Stephenson Harwood, Mr Hussein's lawyers, told the court.

Libor, which stands for London Interbank Offered Rate, tracks the average interest rates banks pay to borrow money from each other.

The interest rates of trillions of pounds of mortgages and commercial loans are linked to Libor.

Every day, a member of staff at each of 16 banks - the submitter - would state what interest rate they thought their bank would have to pay to borrow cash from another bank. An average would be taken and published.

At the same time, banks had large positions - investments that could gain or lose money if Libor moved up or down.

Since Libor was introduced in 1986, traders in charge of supervising those investments have frequently made requests of Libor submitters - asking them to tweak their bank's estimates of the interest it would pay up or down by a hundredth of a percentage point or two.

Prosecutors have brought four trials for Libor rigging and levied billions of pounds in fines against banks including UBS for the requests, claiming they were dishonestly seeking to nudge the Libor average in their favour, motivated by greed.

'Chats'

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