The Hong Kong Monetary Authority has found evidence of UBS traders trying to rig Hong Kong's benchmark interest rate between 2006 and 2009 following a more than yearlong probe that included eight other banks. Up to 16 banks are being targeted, meanwhile, in the US.

The Hong Kong Monetary Authority has found evidence of UBS traders trying to rig Hong Kong's benchmark interest rate between 2006 and 2009 following a more than yearlong probe that included eight other banks.

Separately, the US Federal Deposit Insurance Corp has sued 16 of the world’s largest banks, accusing them of cheating now-defunct banks by manipulating interbank interest rates. The banks being sued are Barclays, UBS, Bank of America, Citigroup, Credit Suisse, Deutsche Bank, HSBC Holdings, JPMorgan Chase & Co, and Royal Bank of Scotland. Other defendants in the lawsuit are Rabobank, Lloyds Banking Group plc, Societe Generale, Norinchukin Bank, Royal Bank of Canada, Bank of Tokyo-Mitsubishi UFJ and WestLB AG, according to a report by Reuters. The FDIC website makes no reference to the issue. The report pointed out that some of the banks accused in the lawsuit, including Barclays and UBS, have already paid some $6 billion to resolve charges from US and European authorities that they worked to manipulate benchmark interest rates.

In the Hong Kong matter, the HKMA said in a statement last week that while it had found no evidence of manipulation of the Hong Kong Interbank Offered Rate between banks, it found material weaknesses in UBS's internal controls and governance in managing the HIBOR submission process.

The HKMA investigation into UBS found that between September 2006 and June 2009 six traders sent about 100 internal chat messages containing change requests with a view to rigging the bank's submissions for the HIBOR fixing. The investigation also found that UBS failed to report to the HKMA misconduct of its staff relating to the change requests when the bank became aware of the activities.

“There is evidence that about one-third of these change requests affected the HIBOR fixing rates submitted by UBS. For the remaining two-thirds, there is no evidence to suggest that the outcome of the HIBOR fixing was impacted. According to the HKMA's estimate, the UBS change requests had negligible impact on the actual outcome of the HIBOR fixing,” the HKMA said.

The investigation into UBS was launched in December 2012 and later extended to cover eight other banks, including Bank of Tokyo-Mitsubishi UFJ, Citibank, Credit Agricole Corporate and Investment Bank, Deutsche Bank, the Hongkong and Shanghai Banking Corporation, JPMorgan Chase Bank, Royal Bank of Scotland and Societe Generale.

The HKMA said that it had found no evidence of collusion between these banks to rig the HIBOR fixing and that it in February 2014 it had also asked another bank to conduct an external review of its communication records.

Disciplinary action
In the light of the  investigation, the Hong Kong regulator has ordered UBS to take disciplinary action against staff members responsible for the misconduct in the HIBOR fixing as well as implementing a plan to address control and governance weaknesses within six months.

UBS said in a statement that it had taken appropriate measures to incorporate the HKMA's suggested improvements into its operations.

"We are pleased that the investigation of the HKMA returned the same results as our own internal investigation - no collusion among banks and no noticeable impact on the fixing of HIBOR from any conduct occurring during the period in question,” UBS said.

“We have not been part of the HIBOR fixing panel since 2010 and have taken appropriate steps to incorporate the HKMA's suggested improvements into our operations,” it added.

In October 2010, UBS ceased to be a HIBOR reference bank and no longer makes submissions for the HIBOR fixing, the HKMA said.

Following the LIBOR scandal in 2012, UBS was one of a number of banks fined for fixing the rate in order to boost the profits of traders prior to the financial crisis.

The scandal arose during and before the financial crisis when it was discovered that banks were manipulating rates so as to profit from trades or give the impression they were more credit worthy than they actually were.

In 2012, UBS paid a record $1.5 billion fine to US, UK and Swiss regulators for attempting to manipulate the LIBOR inter-bank lending rate and in December last year managed to avoid a €2.5 billion($3.47 billion) fine from the European Union for assisting in an investigation into cartels allegedly manipulating interest rates.