UBS will pay $387 million in fines to clean up lingering messes at Credit Suisse, the wounded Swiss banking rival it acquired earlier this year.
The fines, issued concurrently by regulators in the United States and Britain, are related to Credit Suisse’s acknowledged “fundamental failure of management and controls” in 2020 and 2021, which led to a $5.5 billion loss in the collapse of a single client, the investment firm Archegos Capital Management. That incident helped shatter confidence in the 166-year-old Credit Suisse and foretold its eventual absorption into UBS.
That UBS is now left with the bill is a reminder of the risk it took when it agreed, under pressure from Swiss authorities, to rescue Credit Suisse for $3.2 billion. The settlement increases the takeover price more than 10 percent, and it saddles UBS with a host of measures ordered by regulators to prevent such losses from repeating in the future.
In addition to setting up an internal “remediation office” to investigate the root cause of its supervisory errors, UBS will have to file regular progress reports to U.S. authorities, the Federal Reserve ordered. Regulators also ordered UBS to “to address additional longstanding deficiencies in other risk management programs at Credit Suisse’s U.S. operations.”
UBS said in a statement that it would put in place “operational and risk management discipline” across its combined operations.
Archegos’s collapse in March 2021 shocked Wall Street because it had been an under-the-radar firm that only managed the private fortune of its founder, Bill Hwang, and assets from his family.
The firm held a concentrated portfolio of stocks and financial instruments that allowed Mr. Hwang to magnify his bets with leverage outside of the public eye. Much of that borrowed money came from Credit Suisse, and the bank was unable to collect on it when Archegos collapsed.
Other banks also lost money in the Archegos failure, but Credit Suisse was by far the biggest loser.
Rob Copeland covers Wall Street and banking. He is the author of “The Fund: Ray Dalio, Bridgewater Associates and the Unraveling of a Wall Street Legend.” More about Rob Copeland
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