UBS Forex fine – $8 billion???

Industry speculation regarding the possible magnitude of fiscal penalties which could be applied to some of the world’s largest financial institutions for their part in the alleged global FX rate fixing investigation is beginning to surface, with actual amounts being published.

A report published by independent research institution Autonomous Research yesterday has concluded that settlements could cost banks at total of $35 billion, almost six times more than the total fines paid in the LIBOR interest rate saga.

In this particular report, Reuters announced today that Autonomous Research’s findings estimate that UBS will pay $8 billion, the biggest fine for any single bank and more than the $6 billion total all banks have so far shelled out when the penalties were administered for interfering with LIBOR rates.

“We acknowledge that our methodology is speculative, but it applies the theory that repeated wrongdoing attracts higher penalties, as witnessed elsewhere,” the authors said in the report.

Autonomous Research is an independent research firm covering major U.S. and European banks. It was founded in 2009 by Stuart Graham, formerly head of European banks equity research at Merrill Lynch. The firm’s chairman is Lord Myners. The report conducted by Autonomous Research coincided with shares in UBS having taken a 1.9% dip at midday today.

According to Reuters, UBS declined to comment on the Autonomous report, but a spokesman pointed to the bank’s first-quarter report, where it showed 1.778 billion Swiss francs in provisions to cover all its legal difficulties. Its quarterly report in May showed that overall operational and legal risks could hit the bank’s capital base by 3.1 billion francs in the coming 12 months.

LeapRate recently reported that Deutsche Bank had set aside funds in a prudent attempt to meet fiscal penalties resulting from the FX rate rigging probe if the authorites do not find in favor of the bank, however, based on this estimate, it appears that the firm greatly underestimated the potential punitive measures which could arise.

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