Lessons learnt from $1.5bn settlement UBS this week became the first major financial institution to enter a guilty plea to US authorities in two decades - and the first to have two former traders issued with criminal charges as part of the global probe into interest-rate manipulation. But in relative terms, the plea by UBS's Japanese subsidiary and the $1.5bn fine the Swiss bank must pay to settle allegations that it had rigged Libor and other lending rates was a bargain. It could have paid more, had it not won partial immunity by being the first bank to co-operate with the authorities. The UK's Financial Services Authority, for example, gave it a 20 per cent discount on its fine, reducing it to £160m, while the bank disclosed last year that it had signed a partial leniency agreement with the US Department of Justice's antitrust division. The total settlement of $1.5bn - with US, UK and Swiss authorities - sends a strong message to other banks under investigation, including Royal Bank of Scotland . Stephen Hester, RBS chief executive, says the bank is hoping to conclude a settlement by the end of February, and people familiar with the talks say it expects to pay more than the $450m fine paid by Barclays - but less than UBS. In announcing the charges against UBS and its two former traders, Lanny Breuer, chief of DoJ's criminal division, called it "one of the most significant scandals to ever hit the global banking industry." The settlement was a "very robust, very real and very appropriate resolution." But some lawyers say it will chill companies" willingness to co-operate, hampering the probe into the rigging of Libor. The US government's investigation was helped by UBS turning over millions of emails, electronic messages and recorded phone calls, as well as making numerous employees" available for questioning. "The stakes are getting so high you have to wonder what public goal is being served," said one US defence lawyer. The DoJ "can't make cases without substantial co-operation by companies." But he questioned the benefit of co-operation if a company ultimately takes a guilty plea. Companies, especially those in regulated industries like banking, generally don't have much of a choice, lawyers say. If they don't co-operate, they could face harsher penalties or risk losing their licences. But when co-operation results in what lawyers say are draconian penalties, it has some legal advisers rethinking their advice. "It draws an interesting focus on whether financial institutions will have an incentive to want to self-report," notes another US defence lawyer. Lawyers point to the $1.9bn penalty HSBC paid to settle allegations relating to money-laundering and breaches of sanctions as a measure that penalties are getting too large. "If you can't fight, you have to pay ransom," says one lawyer. He states that he has advised companies not to self-report when they find and fix wrongdoing. He recalls one chief executive saying he agreed with him, "but you've got to understand: for the outside board members it's the company's money or their reputation. Which do you think they're going to pick? Conversely, others on Capitol Hill have pressed the DoJ to be tougher on companies, especially when they have a long-running pattern of misconduct. In 2009, UBS paid $780m to the DoJ and admitted helping US citizens avoid paying taxes. UBS's assistance, though, was not absolute. The FSA's statement adds that the bank had not co-operated enough to qualify for a full 30 per cent discount, while US regulators took into account the fact that UBS didn't fully co-operate until the US probe had been under way two years. They also note that the improper conduct continued despite the federal probe. While the UBS case may prompt banks to question the wisdom of co-operating with the authorities, similar doubts are being expressed about co-operation between regulators. The same may be said of regulators and prosecutors investigating Libor. At least 10 agencies are probing as many as 20 banks and brokers. The US Commodity Futures Trading Commission was the first to launch a probe into potential manipulation in early 2008, following news reports that some banks might be lowballing their Libor submissions to give a healthier picture of their financial position even as credit dried up during the worst financial crisis in a generation. The CFTC began requesting information from all the banks on the panel that sets Libor and related rates. Not long after, the CFTC discovered evidence banks were not only submitting what they believed were false rates to bolster their financial position, but some were setting rates to benefit their trading positions. CFTC officials contacted the UK FSA and brought in the DoJ, which opened a criminal fraud investigation and an antitrust probe. A "College of Libor" was set up between the various agencies to co-ordinate their inquiries. That collegiate approach has faltered in the last two weeks. The DoJ charged Tom Hayes, a former UBS trader who had also been arrested by the UK's Serious Fraud Office a week earlier. The DoJ then said it would seek Mr Hayes" extradition, which risks igniting a diplomatic row when relations over extradition between the two countries are at an all-time low. The Libor probe, meanwhile, is dependent on good relations between the various agencies. Co-operation between prosecutors will be essential when the probe moves from settling with banks to criminal and regulatory penalties against individuals, which are bitterly contested, white-collar defence lawyers explained - not least because suspects are scattered. "It is important the regulators communicate effectively with one another and agree strategic moves in multi-jurisdictional investigations," said Matthew Cowie, a London-based lawyer at Skadden and a former SFO prosecutor. There should be more certainty and clarity of principle available for the subjects of concurrent jurisdiction cases, whether a company or an accused individual. There are broader risks in a transatlantic prosecutorial spat that run beyond Libor. The DoJ and SFO are working on numerous joint probes where they rely on information and co-operation from one another, including inquiries into alleged wrongdoing at multinationals such as Olympus, or banks such as Barclays. "Economic criminal activity is not confined to a particular jurisdiction; it's transnational," said Sir Edward Garnier, former UK solicitor general. It's essential that prosecutors in the US and UK talk to one another, otherwise the criminality will drive through the gaps.