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December 20, 2012 6:45 pm
Pressure is growing on Swiss regulator Finma after two of the country’s political parties called for the resignation of its head of banking supervision, Mark Branson, who was in charge of UBS’s Japanese securities unit between 2006 and 2008.
In the Libor settlement on Wednesday between the Swiss bank and four global regulators, including Finma, it became clear that employees at UBS’s Japanese unit had been heavily involved in attempts to manipulate various benchmark rates around the world.
According to Finma’s own findings, “a large part of the interference with submissions to benefit proprietary trading positions at UBS” can be assigned to a trader who worked in the Tokyo office between 2006 and 2009. UBS’s Japanese unit pleaded guilty to wire fraud as part of its settlement with the US Department of Justice.
In light of the revelations, Switzerland’s Green party demanded a parliamentary investigation into Mr Branson’s position at Finma, and into the watchdog’s handling of the Libor affair.
“Mark Branson has to resign,” said Daniel Vischer, the Greens’ MP for Zurich. “As long as he remains in his role, Finma has a credibility problem.”
Switzerland’s Socialist party also called for Mr Branson to resign, arguing: “Finma’s credibility cannot be preserved if someone who as a manager was responsible for one of the biggest scandals in modern finance remains in position as head of its bank supervisory activities.”
However, Patrick Raaflaub, the head of Finma, defended Mr Branson, who recused himself from the investigation into UBS.
“There have now been five investigations into the manipulation of Libor – by the FSA, the DoJ, the CFTC, the Japanese FSA and Finma – and not one of them has found any indication that Mark Branson knew of or was involved in wrongdoing relating to Libor in any way,” he said, adding that Finma would co-operate with any parliamentary inquiry.
Mr Raaflaub also dismissed suggestions that Mr Branson should have been aware of problems at his unit. “Mark Branson was responsible for 1,000 or so employees. And as is normal in institutions of this kind, the bank was organised in a matrix structure. The result was that the reporting lines didn’t go vertically to Mark Branson, but horizontally from the traders to their bosses in London or Zurich,” he said.
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