UBS could get hit with hefty fines over Credit Suisse's dealings with Archegos

UBS could get hit with hefty fines over Credit Suisse's dealings with Archegos
The Federal Reserve’s fine over Archegos may be as high as $300 million, while the UK’s Prudential Regulation Authority could impose a penalty of up to $128 million.
JUN 20, 2023

UBS Group faces hundreds of millions of dollars in regulatory fines over Credit Suisse Group’s dealings with Archegos Capital, as the Swiss bank inherits its former rival’s entire litigation portfolio, according to a person familiar with the matter.

The Federal Reserve’s fine over Archegos may be as high as $300 million, while the U.K.’s Prudential Regulation Authority could impose a penalty of up to $128 million, the person said. Switzerland’s financial regulator doesn’t have the authority to impose fines.

UBS’ acquisition of its stricken rival closed earlier this month, handing Chief Executive Sergio Ermotti a potential windfall gain this quarter in the tens of billions of dollars after the government-brokered rescue. At the same time, UBS has previously guided that legal liabilities related to Credit Suisse could run to as much as $4 billion over 12 months, and asset mark-downs could come in at some $13 billion.

Unlike other banks working with the family office that managed Bill Hwang’s fortune, Credit Suisse was slow to unwind its positions and ended up with a $5.5 billion losses related to that business in 2021. UBS suffered a much smaller loss.

UBS erased earlier gains to trade down 1.4% at $20.343 as of 11:12 a.m. in Zurich. The shares have gained 7.5% this year.

The bank had asked Finma, the Fed and the PRA to publish their findings and announce any penalties jointly at the end of next month, according to the Financial Times, which first reported that UBS would face some penalties.

UBS declined to comment. Finma wasn’t immediately available for comment. PRA didn’t respond to a request for comment.

UBS has inherited a long list of unresolved cases following the completion of its emergency takeover of Credit Suisse. They span a criminal conviction for facilitating a Bulgarian cocaine trafficker’s money laundering to a half-billion-dollar settlement in a bribery scandal related to a tuna fishing fleet in Mozambique.

Ermotti has signaled that Credit Suisse’s investment banking unit, which was at the center of the Archegos debacle, is in for a “massive downsizing” as part of the integration into UBS.

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