Di., Juli 25th 2023
In the case of Credit Suisse’s failed investment in the Archegos firm, CS’s new owner UBS has finally reached an agreement with the authorities and agreed to pay $388 million in fines.
Swiss Financial Market Supervisory Authority FINMA announced that this means it has closed its proceedings against CS. As part of the agreement, there will be $269 million in penalties paid to the U.S. Federal Reserve and the equivalent of $119 million to the U.K. Financial Services Regulatory Authority (PRA), UBS announced Monday evening.
In the context of the business relationship with the Archegos, CS seriously and systematically violated financial market law, FINMA said in a statement, as part of its enforcement proceedings.
In March 2021, several investment banks recorded huge losses as a result of the collapse of the U.S. hedge fund Archegos. CS suffered by far the biggest loss with more than five billion dollars. The investigation initiated by FINMA against CS has now ended with the agreement. However, both the Federal Reserve and FINMA have ordered “corrective measures” when it comes to risk management.
While the proceedings against the bank have now concluded, FINMA has simultaneously opened enforcement proceedings against a former CS manager. The agency did not want to say anything about the identity of this person or the details of the procedure.
FINMA found “serious” shortcomings at CS in connection with the business relationship with Archegos.
“In particular, the bank was unable to adequately record, limit and monitor the significant risks associated with Archegos,” FINMA concluded. For example, CS’ own position was “enormously high” for months due to the relationship with Archegos: According to the information, it was worth $24 billion in March 2021. That was four times the position of the next largest hedge fund client and more than half of the bank’s equity.
CS then in turn built up stocks with these securities in order to hedge, which in some cases led to significant market shares in these securities. The bank was thus exposed to “enormous and concentrated risks of loss,” which then materialized in the emergency shotgun merger with UBS.
FINMA has required UBS to apply its own position restrictions related to individual clients across the financial group. In addition, there must be bonus allocation criteria in the remuneration system that takes risk appetite into account. According to Finma, UBS already knows the corresponding rules, which the authority is now ordering to be legally binding.
The big bank responded that it will anchor its risk management principles and corporate culture throughout the combined organization. The implementation of risk management at CS has already begun. The outstanding legal cases and regulatory matters of CS are also to be settled “in the best interests of all stakeholders.”
Because of the fines, there is an additional provision in the financial statements for the second quarter. On June 12, 2023, UBS officially took over CS. The banking group intends to present the Q2 results at the end of August.
Dieser Artikel wurde mit Genehmigung von Keystone SDA nachgedruckt.
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