Zurich UBS is clearing a legacy of Credit Suisse, which was acquired in March: the major Swiss bank is paying a total of 388 million US dollars in fines to the financial supervisory authorities in the USA and Great Britain for its subsidiary Credit Suisse in connection with the collapse of the Archegos hedge fund. This was announced by UBS on Monday evening.
The scandal surrounding Archegos and his manager Bill Hwang caused Credit Suisse a loss of five billion US dollars in mid-March 2021. It exacerbated the crisis of confidence from which the once second largest Swiss bank never recovered. The crisis culminated two years later in a mass flight of customers and a state-orchestrated emergency rescue by UBS.
Archegos CEO Hwang had made high-risk bets on US equities and US-listed Chinese tech stocks using complex OTC derivatives. To do this, the hedge fund manager had borrowed billions from practically all of Wall Street.
UBS wants to settle old cases of Credit Suisse
When the reckless bets turned against Hwang, Goldman Sachs was the first bank to liquidate his positions. The Credit Suisse bankers were the last to become aware of the crisis – and therefore lost the most money. In total, Archegos burned ten billion dollars. UBS also did business with Hwang and lost around $500 million at the time.
The billion-dollar loss in connection with Archegos also led to a special investigation by the Swiss financial regulator Finma for Credit Suisse. This investigation is now complete.
In an internal report commissioned by Credit Suisse, US lawyers identified “failures in the effective management of risks” and “insufficient fulfillment of supervisory duties in the investment bank and in the risk area”. Finma and the US banking regulator then imposed conditions on Credit Suisse.
In the announcement, UBS assured that its own risk management principles and corporate culture would be anchored throughout the bank as part of the integration of Credit Suisse. “UBS has already started to implement the relevant risk management system at Credit Suisse, including the measures that were ordered as part of the agreement reached.” UBS intends to quickly resolve the outstanding legal cases at Credit Suisse as part of the integration.
More: How it came to the deep fall of Credit Suisse.