UBS published a “transparency” report two years ago about what went wrong before the financial crisis. The report was perhaps premature. Yesterday’s SFr1.4bn of Libor-related fines and other charges demonstrate the scale of wrongdoing at the bank between 2005 and 2010. And there is much more besides. UBS has increased its provisions for litigation and regulatory matters by SFr2.7bn this year, and only half of that covers the Libor settlement. The remaining SFr1.3bn will cover other Libor-related issues, as well as claims related to residential mortgage-backed securities. Investors will see very little of the SFr2.5-3bn pre-provision, pre-tax profits that the bank expects to report this year.
UBS is becoming a serial offender in terms of destroying value by means of compliance failures. In 2009, it reached a $780m settlement in the US over tax evasion. Last year, one of its traders lost SFr1.8bn. This year it was fined £30m in regard to that incident. These issues together have cost the bank SFr5.2bn over four years, wiping a third off pre-tax profits for the period.
Is there more to come? Other regulators are looking at Libor, as are US class-action lawyers. These are only, as Donald Rumsfeld would say, the “known unknowns”. There may be more skeletons in the closet.