FX fixing scandal: UBS faces $200m fine as US voids non-prosecution deal over Libor rigging

The US Justice Department has voided a non-prosecution agreement with Swiss bank UBS, the Wall Street Journal reported, citing current and former government officials.

The move comes after more than a year of talks between UBS and the Justice Department, against the bank's hope that the US would look past alleged violations of the 2012 settlement related to interest rate rigging.

UBS and four other global banks are set to reach settlements with the regulator over allegations that they manipulated currency markets.

While UBS may not face any antitrust charges in the case as it was the first financial institution to alert US authorities to the possible manipulation in the currency markets, it is reportedly likely to face fraud charges. Any admission of wrongdoing by the bank would be in violation of the earlier deal struck with the Justice Department.

The decision to tear up the agreement is a sign of the department's increasingly aggressive negotiating posture with financial institutions, the WSJ added.

Negotiations with the Justice Department next week are expected to result in UBS paying a fine of about $200m (£127m, €176m) to the department and pleading guilty to allegations that UBS traders manipulated the London interbank offered rate, or Libor, prior to 2012, some of the sources told the newspaper.

As per the deal reached in December 2012 to resolve investigation into the manipulation of Libor, the US agreed not to prosecute UBS, while the bank promised not to commit crimes for two years. The deal was later extended for one year.

UBS officials are surprised by the development, as they believed the bank would be cleared of antitrust charges, given its cooperation in the foreign exchange investigations by the Justice Department, sources told WSJ.