UBS will pay $387 million in fines to clean up the remaining mess at Credit Suisse, the wounded Swiss banking rival it acquired earlier this year.
The fines, issued simultaneously by U.S. and U.K. regulators, relate to a “fundamental failure of control and control” acknowledged by Credit Suisse in 2020 and 2021, resulting in a loss of $5.5 billion in the bankruptcy of a single client, investment firm Arquegos Capital Management. The incident shattered confidence in the 166-year-old Credit Suisse and signaled its eventual absorption by UBS.
UBS’s current standing on the bill is a reminder of the risk UBS took when it agreed to bail out Credit Suisse for $3.2 billion under pressure from Swiss authorities. The settlement will increase the purchase price by more than 10% and subject UBS to a number of regulatory mandated measures to prevent the recurrence of such losses.
In addition to establishing an internal “correction office” to investigate the root causes of supervisory errors, UBS will be required to provide regular progress reports to US authorities. Federal Reserve Ordered. The regulator also ordered UBS to “address longstanding and further deficiencies in other risk management programs in Credit Suisse’s US operations.”
In a statement, UBS said it would introduce “business operations and risk management disciplines” across the combined business.
The Archegos bankruptcy in March 2021 sent shockwaves through Wall Street. The company was a low-profile company that managed only the personal property of founder Bill Huang and his family’s assets.
The company has a concentrated portfolio of stocks and financial instruments that allowed Huang to leverage and grow his bets out of the public eye. Much of his borrowing money came from Credit Suisse, but the bank was unable to collect it when Arquegos went bankrupt.
Other banks also suffered losses in the Arquegos failure, but Credit Suisse suffered the biggest loss by far.
