Trillion-Dollar Bank Fined $268.5 Million for 'Unsafe and Unsound' Risk Management Practices at Newly-Acquired Subsidiary

UBS, Global Banking Giant, Receives Over $250 Million Fine for Misconduct at Newly-Acquired Subsidiary, Credit Suisse

"Federal Reserve Imposes Heavy Fine on UBS for Credit Suisse's Risk Management Failure with Archegos"

The Board of Governors of the Federal Reserve has issued a press release outlining the reasons for the hefty fine imposed on UBS. The charges revolve around Credit Suisse's inadequate counterparty credit risk management practices concerning Archegos, a family office that experienced a major collapse in March 2021.

Archegos, representing the personal assets of investor Bill Hwang, reached a peak valuation of $36 billion before encountering financial ruin due to aggressive leverage and bad trades, leading to a loss of $20 billion in less than two days. Credit Suisse, having a relationship with Hwang, faced losses of approximately $5.5 billion due to Archegos' default, which the Fed states could have been preventable with proper credit risk management.

The Federal Reserve emphasizes that despite repeated warnings, Credit Suisse failed to adequately handle the risks posed by Archegos during their association. As a result, the Board is demanding that Credit Suisse enhances its counterparty credit risk management practices and addresses long-standing deficiencies in other risk management programs within its U.S. operations.

In conjunction with the Swiss Financial Market Supervisory Authority and the Bank of England's Prudential Regulation Authority, the Federal Reserve's fine against UBS, a global banking giant with $3.1 trillion in assets under management, aims to ensure that its subsidiaries and branches of Credit Suisse operate safely, adhere to regulations, and address any supervisory actions taken by federal and state supervisors.

Jul 31, 2023