UBS Sets Aside $2 Billion For Currency Rigging And Tax Evasion Settlements
UBS, Switzerland’s largest bank, has had to set aside Sfr1.84bn (or £1.2 billon / $1.9 billion) in legal provisions to pay for possible fines and to settle regulatory investigations. It has also warned shareholders that these costs are likely to be “at elevated levels” for the “forseeable future”.
The Swiss lender is currently in discussions with US regulators about a criminal investigation into the alleged rigging of currency benchmarks and with the French authorities into allegations that UBS helped some wealthy clients to avoid tax.
Last month, UBS said that it was looking to settle the foreign exchange investigation but provided scant details. Settlement discussion with French regulators fell apart in July and the Swiss bank remains embroiled in a legal fight. Most of the legal provisions were booked in UBS’s investment bank.
Despite having to set aside legal reserves, UBS produced solid results with net income in the quarter rising 32pc to Sfr762m from Sfr577m over the same period a year ago. However, the results were helped by UBS booking a Sfr1.3bn net tax gain.
Sergio Ermotti, the chief executive of UBS, said: “I am very pleased with our underlying performance for the quarter, which again demonstrates the strength of our franchise. At the same time, we are actively addressing litigation and regulatory matters.”
In a statement, the Swiss bank said it is exposed to “a number of significant claims and regulatory matters” and expects charges associated with litigation, regulatory and similar matters to “remain at elevated levels through 2014”.
The bank added: “At this point in time, we believe that the industry continues to operate in an environment where charges associated with litigation, regulatory and similar matters will remain elevated for the foreseeable future.”
UBS also delivered a somewhat gloomy prognosis for the global economy, saying that many of the underlying challenges and geopolitical issues it has previously highlighted remain and in some cases have intensified. Indeed, UBS said that “a number of new concerns have arisen including fear of risks related to the Ebola virus”.
It continued: “The mixed outlook for global growth, the absence of sustained and credible improvements to unresolved issues in Europe, continuing US fiscal and monetary policy issues and increasing geopolitical instability would make improvements in prevailing market conditions unlikely.”
