2023-07-24 21:05:11
The bank UBS pays the pots following the takeover of Credit Suisse, and agreed to pay a fine, nevertheless anticipated, of 387 million dollars for the poor risk management, by the latter, of the American fund Archegos.
“Credit Suisse has failed to properly manage the risk posed by Archegos despite repeated warnings,” the US central bank (Fed) said in a press release on Monday.
This action was taken jointly with the Bank of England, which also reported, in a separate statement, “significant failures in risk management and governance”.
UBS will thus pay 268.5 million dollars (233.3 million francs) in the United States, and 87 million pounds sterling in the United Kingdom (97 million francs).
Risky bets on the stock market
It is the largest fine imposed by the Prudential Regulatory Authority (PRA), a branch of the Bank of England.
“Credit Suisse’s failures to effectively manage risk have been extremely serious and have created a major threat to the security and soundness of businesses. The seriousness and widespread nature of these failings have led to today’s fine, which is the largest ever imposed by the PRA,” PRA boss Sam Woods said in the statement.
The Archegos fund had taken risky bets on the stock market by borrowing money from banks but found itself unable to hedge its positions when the markets turned, and imploded in 2021, costing Credit Suisse more than $5 billion.
Additional provision
The Swiss financial market regulator, Finma, for its part indicated that it had “found that Credit Suisse has seriously and systematically violated the rules of financial market law in the context of its business relationship with the Family Office Archegos”, in its press release.
“Finma is ordering corrective measures once morest the legal entity that succeeded Credit Suisse, namely UBS. It has also opened enforcement proceedings once morest a former manager of Credit Suisse.
The number one Swiss bank, which bought its competitor Credit Suisse on June 12, said in a press release that it would record an additional provision in the second quarter. The publication date of its quarterly results has been postponed to August 31 due to the complexity of this takeover.
Only 35 million provisioned
Perceived as the weak link in the banking sector in Europe, Credit Suisse faced a serious crisis of confidence in mid-March in the wake of the bankruptcy of the American bank SVB, which prompted the Swiss authorities to organize its emergency rescue through a takeover by UBS.
On March 19, UBS had agreed to take it over for 3 billion Swiss francs with strong guarantees from the Confederation. On June 9, UBS formalized this state support by signing a guarantee contract with the Confederation to cover itself once morest any losses resulting from this takeover.
This guarantee can go up to 9 billion francs but only if the losses exceed 5 billion.
Credit Suisse has only provisioned 35 million francs ($40.4 million) for possible fines related to Archegos, the Financial Times reported on June 20.
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