Credit Suisse Fined for Archegos Failures

Three regulators have completed their actions against Credit Suisse for its risk management failures around the Archegos episode, which cost the bank over $5 billion. Credit Suisse was rescued by UBS, with the encouragement of local authorities, earlier this year – UBS has agreed to pay fines to UK and US authorities.

The US Federal Reserve has fined the bank $268.5 million for “misconduct” and “unsafe and unsound” credit risk management procedures, while the UK’s Prudential Regulatory Authority (PRA) has fined the bank GBP 87 million (reduced due to cooperation) in relation to the activities surrounding the collapse of Archegos which defaulted on a huge total return swap position in March 2021. Nomura, Morgan Stanley and UBS were all caught up in the collapse.

Local Swiss regulator FINMA has not levied a fine on the bank, rather in a release it says it has “concluded proceedings” against the bank and ordered corrective measures from its new owner, UBS. FINMA has also commenced proceedings against an unnamed former Credit Suisse manager.

The US Federal Reserve says its board requires Credit Suisse to improve counterparty credit risk management practices and to address additional longstanding deficiencies in other risk management programs at its US operations, which is where the key prime brokerage relationship with Archegos existed.

For its part, the PRA’s CEO and deputy governor for prudential regulation, Sam Woods, says, “Credit Suisse’s failures to manage risks effectively were extremely serious, and created a major threat to the safety and soundness of the firm. The seriousness and widespread nature of those failures has led to today’s fine, which is the largest ever imposed by the PRA.”