UBS - the unknown unknowns Two years ago, UBS released a "transparency" report on what went wrong before the financial crisis. The report was perhaps premature. Wednesday's SFr1.4bn of Libor-related fines and other charges demonstrates the scale of wrongdoing at the bank between 2005 and 2010. And there is much more besides. UBS has increased its provisions for litigation and regulatory matters by SFr2.7bn this year, and only half of that covers the Libor settlement. The remaining SFr1.3bn will cover other Libor-related issues, as well as claims related to residential mortgage-backed securities. Investors will see very little of the SFr2.5-3bn pre-provision, pre-tax profits that the bank expects to report this year. UBS is becoming a serial offender when it comes to destroying value through compliance failures. In 2009 it reached a $780m settlement in the US over tax evasion. Last year one of its traders lost SFr1.8bn and this year it was fined £30m over the same incident. These issues combined will have cost the bank SFr5.2bn over four years, wiping a third off pre-tax profits for the period. Is there more to come? Other regulators are looking at Libor, as are US class action lawyers. These are just, as Donald Rumsfeld would say, the "known unknowns." There may be more skeletons in the closet. The shares rose on Wednesday, reflecting relief that the Libor problem has a number attached to it, and that it will not affect UBS's capital position. The bank will have a Basel III common equity tier one ratio of 9.3 per cent at the end of the year, the same as at the end of the third quarter as the Libor fines have been offset by deleveraging. The shares have rallied 50 per cent since the end of July as investors warmed to UBS's plans to scale back its investment bank. But they now trade on a hefty 1.3 times tangible book value. And when it comes to UBS it is always worth leaving a little room for error.