UBS - UBS agrees to pay nearly $400M to settle Credit Suisse's Archegos missteps

2023-07-24 14:55:07 ET

UBS Group ( NYSE: UBS ) has agreed to pay a total of $387M to the U.S. and U.K. regulators for misconduct by its recently-acquired subsidiary, Credit Suisse Group ( NYSE: CS ), involving the defunct Swiss bank's dealings with investment fund Archegos Capital Management.

In June, UBS ( UBS ) closed its acquisition of Credit Suisse ( CS ) in a government-orchestrated deal in the wake of a U.S. banking crisis that started with the failure of Silicon Valley Bank in March.

The Fed on Monday fined UBS ( UBS ) $268.5M over Credit Suisse's ( CS ) "unsafe and unsound counterparty credit risk management practices with its former counterparty, Archegos," the central bank said in a release.

After Archegos defaulted in 2021, the Fed added, Credit Suisse ( CS ) suffered a $5.5B trading loss, thus failing "to adequately manage the risk posed by Archegos despite repeated warnings."

As such, the Fed said Credit Suisse ( CS ) must improve counterparty credit risk management practices, as well as address further longstanding deficiencies in other risk management programs.

In addition, the Bank of England's Prudential Regulation Authority imposed an EUR 87M ($112M) fine on UBS ( UBS ), representing its largest penalty to date. The two fines come to about $388M.

Credit Suisse ( CS ) “failed to learn from past similar experiences and had insufficiently addressed concerns previously raised by the PRA,” the regulator said in a statement .

This could be the first of several settlements that UBS ( UBS ) could have to endure as it starts picking up Credit Suisse's ( CS ) legal tab, which ultimately helped bring about its demise.

More on UBS and Credit Suisse:

• UBS: The Thrill Of Risk And Potential Reward, But Wait For Earnings
• UBS pauses plan for wholly owned mutual fund business in China - report
• UBS aims to skip $10B backstop from Swiss govt for Credit Suisse deal - report
• UBS plans of shedding over half of Credit Suisse staff - report

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