UBS owes $268m in Credit Suisse fines

Swiss bank UBS (UBS) has been fined $268.5 million by the U.S. Federal Reserve over misconduct that occurred before its merger with rival bank Credit Suisse in March.

The Federal Reserve Board issued a consent order and imposed the fine on UBS Group AG of Zurich, Switzerland, for actions taken by Credit Suisse prior to the acquisition. The misconduct in question pertained to “unsafe and unsound counterparty credit risk management,” with the Fed highlighting that Credit Suisse’s dealings with former counterparty Archegos Capital Management LP violated fair conduct rules.

In addition to the Federal Reserve’s fine, UBS is also facing penalties from the Swiss Financial Market Supervisory Authority and the Bank of England’s Prudential Regulation Authority (PRA). When combined, the total cost to UBS is expected to reach around $387 million.

The troubles for Credit Suisse arose when the investment fund Archegos, led by former Tiger Management analyst Bill Hwang, suffered a significant collapse, resulting in $20 billion in losses. Credit Suisse faced losses amounting to $5.5 billion in connection with this event. Regulators have criticised the bank for its failure to adequately manage the risks posed by Archegos, despite receiving multiple warnings.

Following the debacle, Credit Suisse’s CEO and chief risk manager both resigned from their positions. The company attributed a $252 million quarterly drop to third-party losses related to the Archegos incident.

Sam Woods, CEO of the Bank of England’s PRA, expressed the severity of Credit Suisse’s risk management failures, stating that they posed a substantial threat to the safety and soundness of the institution. Consequently, the hefty fine imposed by the PRA on Credit Suisse is the largest ever issued by the authority.

Despite the substantial fines imposed on UBS, the bank’s shares saw a modest increase of 0.75% on the day.