UBS fined nearly $400 million in Credit Suisse Archegos Mess

UBS will pay $387 million in fines to clear up the mess at Credit Suisse, the wounded Swiss banking rival it acquired this year.

The fines, issued simultaneously by US and UK regulators, are linked to a “fundamental failure of management and controls” recognized by Credit Suisse in 2020 and 2021, which resulted in a $5.5 billion loss in the collapse of one client, investment firm Archegos Capital Management. The incident helped shatter confidence in the 166-year-old Credit Suisse and predicted its eventual absorption into UBS.

That UBS stayed with the bill is a reminder of the risks it took when, under pressure from Swiss authorities, it agreed to bail out Credit Suisse for $3.2 billion. The settlement increases the acquisition price by more than 10 percent and burdens UBS with a set of measures ordered by regulators to prevent such losses from recurring.

In addition to creating an internal “office of correction” to investigate the root cause of its oversight errors, UBS will have to submit regular progress reports to US authorities, Fed order. The regulators also ordered UBS to “address additional long-standing deficiencies in other risk management programs in Credit Suisse’s US operations.”

UBS said in a statement that it would apply “operational discipline and risk management” across its combined operations.

The collapse of Archegos in March 2021 shocked Wall Street because it was an under-the-radar company that only managed founder Bill Hwang’s private wealth and family assets.

The company maintained a concentrated portfolio of stocks and financial instruments that allowed Mr. Hwang to amplify his leveraged bets out of the public eye. Much of that borrowed money came from Credit Suisse, and the bank was unable to collect it when Archegos collapsed.

Other banks also lost money in the Archegos crash, but Credit Suisse was by far the biggest loser.