Credit Suisse has fined UBS for mistakes made less than two month after UBS took over its former rival in an emergency.
The Federal Reserve announced on Monday that it would fine UBS $387 million for the'misconduct of Credit Suisse' in their risk management of Archegos Capital Management - an investment fund which collapsed in 2020. The fines announced against UBS on Monday totaled $387 million, including fines imposed by the Swiss government and Bank of England.
Archegos Capital Management (a former client of Credit Suisse) borrowed money in order to buy massive shares in media companies such as ViacomCBS or Discovery. However, when the share price dropped, Archegos Capital Management was unable pay its lenders. Discovery is now a part of Warner Brothers Discovery - CNN's parent.
The Federal Reserve Board announced the fine after stating that Credit Suisse had engaged in 'unsafe' and 'unsound' credit risk-management practices when dealing with Archegos.
The Fed stated that 'Credit Suisse failed to address identified risk associated with Archegos portfolio despite staff repeatedly raising red flags to multiple management levels'.
UBS and Credit Suisse were also ordered to submit, within the next 120-days, a plan for strengthening oversight of their US operations.
In 2021, the default of a little-known hedge funds sent shockwaves through Wall Street. Credit Suisse suffered a loss of $5.5 billion and two of its top executives left the bank.
Credit Suisse stated in a press release that UBS had already started implementing their risk framework throughout the combined organization. They also said that UBS intends to resolve Credit Suisse’s outstanding litigation and regulation matters for the benefit of all its stakeholders including clients, investors and employees.
UBS acquired its Swiss counterpart for 3.25 billion Swiss Francs (3.25 billion dollars) in June. This was the largest banking deal since 2008. Credit Suisse, the former second largest lender in Switzerland, lost customer deposits this year. It also faced a greater withdrawal rush after regional American banks Silicon Valley Bank (now Signature Bank) and Silicon Valley Bank failed. UBS was rescued by Swiss authorities to prevent an international banking crises. UBS also struck a deal to share Credit Suisse losses with the Swiss government.