UBS agrees to pay $388 million over Credit Suisse’s Archegos failings



ZURICH, July 24 (Reuters) – UBS (UBSG.S) has been ordered to pay $388 million to British and U.S. regulators over Credit Suisse’s dealings with private investment firm Archegos Capital Management, the Swiss bank said on Monday.

The settlement is the first of several that UBS could have to pay after it last month closed its takeover of Credit Suisse, inheriting the collapsed bank’s legal battles.

Under the agreement, UBS said Credit Suisse, now a subsidiary of the bank, has agreed to pay the U.S. Federal Reserve $269 million.

It will also pay the Bank of England 87 million pounds ($119 million), bringing the total payments to $388 million.

Reports ahead of time had suggested the U.S. regulator would impose a penalty of up to $300 million and the UK regulator would fine UBS up to 100 million pounds over the bank’s dealings with Archegos.

UBS on Monday said it would tighten up operational and risk management discipline at Credit Suisse after it completed its takeover of its smaller rival.

The bank also said it intended to resolve Credit Suisse’s remaining litigation in “the best interest of its stakeholders, including investors, clients and employees.”

UBS said in May, just before completing the deal, that it was setting aside $4 billion for potential lawsuits connected to its Credit Suisse takeover.

Although unable to levy fines, Swiss financial regulator FINMA has ordered corrective measures in the wake of the Archegos affair, including changes to the bank’s compensation culture that take more account of risk appetite.

“For employees with particular risk exposure, a control function must assess and record the risks taken before the bonus is determined,” FINMA said.

“UBS already has corresponding rules in place, which FINMA is now ordering to be legally binding,” it added.

The regulator said it has also opened enforcement proceedings against an unnamed former Credit Suisse banker linked to the affair.

Credit Suisse lost $5.5 billion when U.S. family office Archegos Capital Management defaulted in March 2021.

UBS also lost money when the hedge fund’s highly leveraged bets on certain technology stocks backfired and the value of its portfolio plummeted.

An independent report into the affair criticised the bank’s conduct, saying its losses were the result of a “fundamental failure of management and control at its investment bank, and its prime brokerage division in particular.”

The British fine is the highest levied by the Prudential Regulation Authority, part of the BoE, to date, and comes after it found Credit Suisse had breached four of its “fundamental rules”.

Breaches included not acting with due skill, care and diligence, as well as not having effective risk management strategies and controls.

“Credit Suisse’s failures to manage risks effectively were extremely serious, and created a major threat to the safety and soundness of the Firms. The seriousness and widespread nature of those failures has led to today’s fine,” said Bank of England Deputy Governor Sam Woods.

Image by: Reuters



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Edmund Shing, PhD

Global Chief Investment Officer
BNP Paribas Wealth Management

Edmund has over 29 years of experience in financial markets in a wide variety of positions, ranging from proprietary trading to portfolio manager in a number of financial institutions in London and Paris.  He previously held the role of Global Head of Equity and Derivative Strategy at BNP Paribas in London from 2015 to 2020, and has been Chief Investment Officer at BNP Paribas Wealth Management since November 2020.

Edmund is responsible for piloting our investment strategy and will continues to rollout out recommendations and themes with actionable advice that brings our expertise to our clients and support to our client-facing teams.  In this time of change, his expertise in following and anticipating markets is a true value added for both our customers and those at Wealth Management who serve them.

Edmund has a PhD in Cognitive and Computing Science from the University of Birmingham in the United Kingdom, and has done advanced studies in Knowledge-Based Systems and in Experimental Psychology.  He is an EFFAS-certified financial analyst. He has also authored the book “The Idle Investor” published by Harriman House in 2015, proposing 3 simple investment strategies that take only a few minutes to execute per month.

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