UBS to pay $388m in fines relating to Credit Suisse’s doomed dealings with Archegos
UBS Group AG and its subsidiary Credit Suisse have agreed to pay around $388 million in fines to resolve Credit Suisse’s outstanding regulatory matters related to the bank’s dealings with Archegos Capital Management.
Credit Suisse has been issued fines totalling $388 million for “significant failures in risk management and governance between 1 January 2020 and 31 March 2021”.
The fines are the result of a co-ordinated investigation between the UK’s Prudential Regulation Authority (PRA), the Swiss Financial Market Supervisory Authority (FINMA) and the US Federal Reserve.
UBS Group AG says it will pay $269 million to the Federal Reserve and a further $119 million to the PRA. The latter fine was reduced from $160 million for the bank’s co-operation in resolving the issue.
The issue arose out of Credit Suisse’s dealings with the former US asset management firm Archegos Capital Management, to which it provided prime brokerage services and engaged in equity total return swaps (TRS).
However, when the asset management firm imploded in March 2021 after defaulting on its margin calls, it left Credit Suisse with losses totalling $5.1 billion, with the PRA stating that it resulted in “significant financial and reputational damage” for the bank.
The PRA says that the ensuing investigation found that the bank’s risk management oversight and corresponding practices “fell well below the regulatory standards required” and that it presented “an unsound risk culture within the business line that failed to balance considerations of risk against commercial reward appropriately”.
Sam Woods, deputy governor for prudential regulation and CEO of the PRA, says: “Credit Suisse’s failures to manage risks effectively were extremely serious, and created a major threat to the safety and soundness of the firm.
“The seriousness and widespread nature of those failures has led to today’s fine, which is the largest ever imposed by the PRA.”
Following the ruling, UBS Group AG issued a statement saying: “UBS will implement its operational and risk management discipline and its culture across the combined organisation.”
UBS claims to be already implementing a risk framework across Credit Suisse, including “actions addressing these regulatory findings”.
“UBS intends to resolve Credit Suisse’s outstanding litigation and regulatory matters in the best interest of its stakeholders, including investors, clients and employees.”