UBS is understood to be in line to receive immunity from any fines imposed by the European Commission as a result of its investigation into alleged manipulation of the FX markets.
It was the first of the banks implicated in the probe to approach regulators to offer its cooperation, according to sources cited by Bloomberg.
UBS declined to comment when approached by Profit & Loss.
Under the terms of the Commission’s controversial leniency policy, companies “involved in a cartel – which self-report and hand over evidence” are offered either total immunity or a reduction in any fines which would otherwise have been imposed.
“Companies which do not qualify for immunity may benefit from a reduction of fines if they provide evidence that represents ‘significant added value’ to that already in the Commission’s possession and have terminated their participation in the cartel,” the policy states.
The first company to meet these conditions is granted a 30 to 50% reduction, the second 20 to 30% and subsequent companies up to 20%, creating a strong impetus for firms to be the first in line to offer up information to investigators.
Following the EU’s Libor decision and imposition of penalties, both UBS and Barclays were able to qualify for a total reduction in fines of €3.2 billion under the same rules for having been among the first banks to offer their cooperation.
But according to Arlene McCarthy, the Member of the European Parliament (MEP) who headed up the EU’s work on criminal sanctions for insider dealing and market manipulation, the rules are “too lenient, quite clearly”.
“To get off scot-free, I think, is not the right message to send,” she adds. “I’m not in favour of the confessional approach not attracting any fines or sanctions.”
The Commission defends the policy, saying it enables it to “not only to pierce the cloak of secrecy in which cartels operate but also to obtain insider evidence of the cartel infringement.”
It adds: “The leniency policy also has a very deterrent effect on cartel formation and it destabilises the operation of existing cartels as it seeds distrust and suspicion among cartel members.”
The EU would have to conclude its current investigations into alleged FX manipulation before making a decision on granting immunity or a reduction in any eventual fines levied.
EU immunity also does carry any weight in the final decisions of other regulatory bodies in the UK and US.