UBS Group AG has agreed to pay approximately $387 million in fines related to Credit Suisse Group AG's misconduct in its dealings with Archegos Capital Management. This comes as UBS, the new owner of the collapsed Swiss rival, takes on the responsibility of settling the legal troubles.
As part of a consent order with the Federal Reserve, UBS will pay $268.5 million for "unsafe and unsound counterparty credit-risk management practices" at Credit Suisse. The Bank of England's Prudential Regulation Authority has also imposed a fine of £87 million ($112 million) on UBS. This is the largest penalty ever imposed by the UK regulator.
The Prudential Regulation Authority criticized Credit Suisse, stating that it failed to learn from previous experiences and neglected concerns raised by the regulator. The Federal Reserve highlighted that Credit Suisse lacked adequate governance, experienced staff, and sufficient risk management practices.
UBS's acquisition of Credit Suisse was finalized last month, potentially providing a windfall gain for UBS CEO Sergio Ermotti. However, the bank has already estimated that it could face up to $4 billion in legal liabilities and asset mark-downs of around $13 billion related to Credit Suisse.
Unlike other banks, Credit Suisse was slow to unwind its positions with Archegos and incurred losses of $5.5 billion in 2021, while UBS suffered a much smaller loss.
UBS has already begun implementing its risk framework to address the regulatory findings and ensure proper risk management at Credit Suisse. The bank will also be required to submit a plan for sustainable governance and a risk-management framework to the regulators.
Switzerland's financial regulator, Finma, has ordered corrective measures for UBS as it concluded that Credit Suisse violated financial-market laws in its dealings with Archegos. However, Finma does not have the authority to impose fines.
Overall, UBS's settlement of the Archegos-related penalties demonstrates the bank's commitment to addressing the misconduct at Credit Suisse and implementing necessary corrective measures. The bank is set to announce the combined firm's second-quarter earnings next month, which will reflect the provision for the penalties tied to the Archegos matter.