Is The Swiss National Bank Using UBS To Launder Its Euro Purchases?

Libor keeps rising as the short-term funding situation in Europe gets worse by the day: today USD Libor hit 0.50969%, a change of 0.01281% from Friday, the first time this metric has pushed over 0.5% in about nine months. The Libor reporting dispersion among BBA member banks has actually tightened marginally from last week, with one notable outlier: UBS. Of the 15 banks that report both USD and EUR-based LIBOR, all disclose a higher offer rate for EUR Libor except for UBS! The Swiss bank is a blatant outlier, in that its disclosed EUR Libor rate of 0.4850% is in fact 10% lower than its USD Libor. Just how big are the dollar funding needs of UBS, which many see as an "open market operations" vehicle for the SNB, a bank which it is no secret is now openly intervening in FX markets, and thus likely has provided a lifeline to UBS to provide this lower EUR Libor rate compared to US Libor. So how would the circle jerk go: SNB buys EUR in the open market (causing massive destruction in the EURCHF and GBPCHF pairs), then the excess euro holdings are funneled back into the market via a much cheaper EUR lending rate in the 3M funding market (LIBOR) compared to all other banks: the UBS 3M EUR Libor rate is a whopping 30% below the average EUR Libor rate of 0.6344%, nearly double the spread from average of the next lowest EUR Libor offer, that of RBS at 0.56%.

Below is the 3M USD Libor by BBA bank:

And here is the 3M EUR Libor by BBA bank:

Note the material variation of UBS EUR Libor from the average:

And here is the critical difference between a BBA bank's EUR and USD libor fixing. Something is certainly off with UBS.