The UBS AG logo is displayed at the company's office in Sydney, Australia, on Monday, Aug. 19, 2013. UBS, Switzerland•s largest bank, was the No. 1 in equity underwriting in the Asia Pacific region excluding Japan in 2012. UBS•s Asia-Pacific performance stands in contrast to the rest of the world, where the bank is undergoing radical surgery to shutter most debt-trading and cut 10,000 jobs. Photographer: Brendon Thorne/Bloomberg

UBS will pay a total of $545m to US authorities to settle allegations that arose in an investigation into the rigging of foreign exchange and Libor benchmarks. The Swiss bank will be hoping the payment draws a line under multiple trading scandals lasting several years.

The fine, much lower than expected, includes a $342m Federal Reserve penalty related to forex activities, the bank said in a statement on Wednesday. It will not be paying a fine on forex to the Department of Justice and will not face criminal charges on the matter.

However, the bank was found to have violated a settlement over alleged rigging of the London Interbank Offered Rate and will pay an additional $203m and plead guilty to criminal charges.

Wednesday’s fine is in addition to the $799m UBS paid to other US and UK authorities over forex in November.

UBS is one of six banks that settled with the DoJ and several other regulators on Wednesday as part of a $5.6bn deal over forex, one of the world’s biggest financial markets.

The revelation that traders colluded to move around currency exchange rates was particularly embarrassing for the banks because it came so soon after they paid billions of dollars to settle claims over the rigging of Libor. It has raised questions as to whether the industry learned any lessons from the previous scandal.

Axel Weber, chairman, and Sergio Ermotti, chief executive, said: “The conduct of a small number of employees was unacceptable and we have taken appropriate disciplinary actions.”

The bank won immunity on the initial part of the DoJ’s investigation that focused on antitrust breaches by coming forward first with information.

While the lender was still vulnerable to allegations that it made inadequate disclosures to clients and counterparties about the profit it was making on certain currency products, it will escape penalties on that part of the DoJ’s probe.

The bank said the DoJ was not prosecuting UBS for antitrust, fraud or precious metals violations.

The bank’s role in the forex scandal means that it has breached the terms of an earlier non-prosecution agreement (NPA) struck with the DoJ in 2012, when it paid $1.5bn to US and UK authorities over allegations it attempted to rig Libor.

That earlier NPA has been scrapped because UBS broke a pledge not to break any US criminal law. The bank will now have to plead guilty to one count of wire fraud related to the London benchmark rate. This is in addition to a previous criminal charge to which its Japanese subsidiary pleaded guilty in 2012.

This means the bank would need waivers from the US Department of Labor and the Securities and Exchange Commission to continue doing business. However, other big banks including Credit Suisse and BNP Paribas have obtained waivers after recent resettlements.

“We would expect the visibility from the settlement as well as the size of the fine to be a positive catalyst,” said Jon Peace, banks analyst at Nomura. Mr Peace did not expect the Libor guilty plea to weigh heavily on the bank’s share price.

Chart: UBS's forex settlement

Shares were up 4 per cent at mid-afternoon.

While settling the foreign exchange probe is a big step for UBS, the bank still has a number of other legal matters outstanding including potential civil litigation on Libor and foreign exchange activities and an investigation into the US market for residential mortgage-backed securities.

The DoJ is putting the bank on a three-year probation period for breaching the Libor deal, UBS said.

Last week people familiar with the situation told the Financial Times the bank’s total settlement would be below $800m.

Mr Ermotti said on May 5 that he expected UBS’s provisions to be “enough to accommodate any resolution” of the issues.

The other banks that settled on Wednesday are: Barclays, Citigroup, Bank of America, JPMorgan Chase and Royal Bank of Scotland.

Barclays has provisioned for the largest fine, at £2bn. Unlike the other banks, it did not take part in a $4.3bn deal in November with the UK Financial Conduct Authority and US regulators due to the added involvement of the New York Department of Financial Services. The British bank also settled with the DFS and the FCA as part of Wednesday’s deal.

Like UBS, Barclays also has a prior deal over Libor rigging. It was fined an extra out $60m for breaching its 2012 Libor NPA.

Several former traders are also under criminal investigation by the DoJ and the UK’s Serious Fraud Office, which arrested one who worked at RBS in December. No charges have been filed.

In a November deal, Citi, JPMorgan, RBS and UBS — as well as Bank of America and HSBC — paid $4.3bn to other US and Swiss regulators and the FCA to settle similar allegations.

Forex fines
BankTotal so far
UBS$1.14bn
JPMorgan$1.9bn
Citigroup$2.28bn
RBS$1.3bn
HSBC$618m
Bank of America$455m
Barclays$2.3bn

Additional reporting by Gina Chon in Washington

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