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UBS fined $387 million for Credit Suisse’s mishandling of Archegos
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By Nithya Bose in UK Business News, posted July 25, 2023
UBS will pay $387 million in fines to British and US regulators over Credit Suisse's mismanagement of dealings with defunct investment firm Archegos Capital Management.
Archegos' failure in 2021 cost the Swiss bank over $5.5 billion in losses, damaging its reputation and eventually leading to its acquisition by UBS.
The deal, carried out for $3.2 billion under pressure from Swiss authorities, now presents UBS with the financial consequences of Credit Suisse's failure.
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The settlement raises the takeover price by over 10 percent and burdens UBS with a series of regulatory-mandated measures to prevent similar losses in the future.
To rectify supervisory errors, UBS must establish an internal "remediation office" to investigate the root causes of the failures.
The Federal Reserve has ordered the bank to submit regular progress reports to US authorities.
The regulators also demand UBS address longstanding deficiencies in risk management programs at Credit Suisse's US operations.
UBS has expressed its commitment to implementing "operational and risk management discipline" throughout its combined operations in light of the settlement.
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The collapse of Archegos in March 2021 sent shockwaves through Wall Street, as the firm had operated discreetly, managing only the private fortune of its founder, Bill Hwang, and his family's assets.
By holding a concentrated portfolio of stocks and leveraging financial instruments, Archegos was able to make significant bets without public scrutiny.
Much borrowed money came from Credit Suisse, which could not recoup its losses when Archegos collapsed.
While other banks were also affected by the Archegos failure, Credit Suisse faced the most substantial losses.
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