Oct. 29--Regulation, litigation and demands for stronger capital bases took their toll on two of Europe's biggest banks today.
UBS, which admitted that it is being investigated by regulators in the UK, US and Switzerland over possible rigging of foreign exchange markets, said it would now not hit its target of a 15 percent return on capital by 2015 because it has been ordered to increase the amount of capital it holds against litigation risks,
Deutsche Bank saw its third- quarter profit almost completely wiped out by a euro 1.2 billion ( pounds sterling 1.01 billion) provision against potential fines and legal action. Deutsche, unlike rivals UBS, Barclays and Royal Bank of Scotland, has yet to reach any settlement with global regulators for its role in rigging Libor.
The charge knocked profits back by 94 percent to just euro 18 million (pounds sterling 15.25 million).
"We expect the litigation environment to continue to be challenging," the bank said. It added that probes into its activities could result in significant financial penalties.
UBS said it had now launched its own internal probe into its activities in the foreign exchange markets and that it would take "appropriate action" in respect of staff involved. It did not elaborate further.
The bank also said that from the start of this month the Swiss banking regulator had demanded it raise "on a temporary basis" the amount of capital it holds against risk- weighted assets by 50 percent.