Hong Kong's financial regulator is investigating UBS over interbank interest rate allegations after the Swiss bank agreed to pay $1.53 billion to global authorities over the matter earlier this week.

Switzerland's UBS, which has agreed to pay global regulators a total of SFr1.4 billion (around $1.53 billion) for manipulating key interbank interest rates, is also under investigation by authorities in Hong Kong.

The Hong Kong Monetary Authority said it noted that foreign regulators have made statements about probes into UBS's alleged misconduct, such as rigging of the London Interbank Offered Rate, or LIBOR.

"The HKMA has also received information from overseas regulatory authorities about possible misconduct by UBS involving submissions for the Hong Kong Interbank Offered Rate (HIBOR) and other reference rates in this region" the regulator said in a statement on its website. 

The Zurich-listed bank's record payment to settle the allegations have already drawn a bluntly-worded statement from the UK Financial Services Authority, the regulator. This week, the FSA said it had found at least 2,000 requests for inappropriate interest rate submissions, as well as a number of emails and other communications about the issue.

The rigging of LIBOR has already shaken confidence in London as a global financial centre, but the ripple effects of the scandal go far. The issue is significant as LIBOR and other reference rates are used to help calculate financial products such as mortgages and structured products. 

Loss expected

Zurich-listed UBS, which had already suffered a $2.3 billion loss late last year stemming from unauthorised trading by a London-based trader – who has now been jailed for the offence – said it believes fourth-quarter results attributable to shareholders will show a loss of up to SFr2.5 billion, mainly as a result of the provision for litigation and regulatory issues stemming from this week's announcement.

The bank joins an increasingly long list of banks and other wealth management institutions around the world that have been punished for offences such as breaches of anti-money laundering rules, sales of inappropriate products, interest rate manipulation, and other transgressions. Last year, the-then chief executive of UBS, Oswald Grübel, resigned and was later replaced by current CEO Sergio Ermotti.

Hong Kong

"In this connection, the HKMA has commenced an investigation with a view to (i) ascertaining any misconduct committed by the bank in relation to HIBOR submissions, and (ii) assessing whether the misconduct, if substantiated, has any material impact on the HIBOR fixing results," said the HKMA.

"The HKMA will follow up with the relevant overseas regulatory authorities to gather relevant information concerning the case and consider further actions that need to be taken in the light of its investigation findings and any other relevant information that comes to its attention," it said.