UBS has agreed to pay US and UK banking regulators around $390m in fines related to the investment firm Archegos Capital Management, whose collapse greatly affected Credit Suisse, a rival it acquired earlier this year.

The Federal Reserve’s fine was $268.5m; the UK Prudential Regulation Authority (PRA) imposed a fine of £87m (or around $111m), the agency’s largest ever penalty.

FINMA, the Swiss regulator, said it has concluded its proceedings against Credit Suisse and has opened enforcement proceedings against a former Credit Suisse manager, but it declined to name the person or provide further details.

Archegos default

UBS completed its rescue of Credit Suisse in June, a merger forced on it by Swiss regulators after Credit Suisse lost the confidence of clients and investors. Credit Suisse’s inadequate risk management over Archegos, the Fed said, led to suffering approximately $5.5bn in losses because of its default of Archegos.

Unlike other banks working with Archegos, a limited partnership family office, Credit Suisse took extremely concentrated and leveraged positions in a few stocks and was slow to unwind its positions there.

Two years ago, Credit Suisse published a 172-page report into its failings that was prepared by the law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP.

Regulators in yesterday’s action cited details from that report, including that in early 2021 the bank’s credit risk management team downgraded Archegos’s credit rating internally, while also more than doubling Archegos’s potential exposure limit to $50m.

Unlike other banks working with Archegos, a limited partnership family office that managed the personal assets of Bill Hwang, a former hedge-fund manager, Credit Suisse took extremely concentrated and leveraged positions in a few stocks and was slow to unwind its positions there. (UBS had also worked with Archegos, but it suffered a much smaller loss.)

Last April, Hwang was indicted and arrested on federal charges of fraud and racketeering.

Banking fundamentals

Credit Suisse broke fundamental banking rules, the PRA said, including that a firm should “conduct its business with due skill, care and diligence”. Credit Suisse “failed to learn from past similar experiences and had insufficiently addressed concerns previously raised by the PRA,” the UK regulator said in a statement on Monday.

The Fed said Credit Suisse “lacked adequate governance, experienced staff with sufficient stature, and sufficient data quality and model-risk management to ensure that activities conducted with counterparties were properly risk managed”.

In addition to paying the fine, UBS must submit to regulators a plan for sustainable governance and a risk-management framework, among other things.

UBS “has already begun implementing its risk framework, including actions addressing these regulatory findings, across Credit Suisse,” the bank said in a statement on Monday viewed by Bloomberg.