The U.S. Federal Reserve Board issued a consent order and a $268.5 million fine with UBS Group AG, of Zurich, Switzerland, this week.
The fine and consent order are for misconduct by Credit Suisse, which UBS subsequently acquired in June 2023. The misconduct involved Credit Suisse’s unsafe and unsound counterparty credit risk management practices with its former counterparty, Archegos Capital Management LP.
Credit Suisse was hit with about $5.5 billion in losses in 2021 because of the default of Archegos, an investment fund. During Credit Suisse’s relationship with Archegos, Credit Suisse failed to adequately manage the risk posed by Archegos despite repeated warnings.
Archegos Capital, with $36 billion in assets under management, collapsed in 2022 and its CEO Bill Hwang was indicted on several charges, including fraud.
With this action, the Federal Reserve Board is requiring Credit Suisse to improve counterparty credit risk management practices and to address additional longstanding deficiencies in other risk management programs at Credit Suisse’s U.S. operations.
The Fed board’s action is being taken in conjunction with similar actions being taken by the Swiss Financial Market Supervisory Authority and the Bank of England’s Prudential Regulation Authority. Overall, the penalties announced by the Fed Board and the Prudential Regulation Authority total approximately $387 million.