The Federal Reserve of the United States shack down the Swiss banking giant UBS with hefty fines of $387 million. The fines arise from allegations of misconduct related to its recently purchased subsidiary, Credit Suisse.
In the wake of a banking crisis triggered by the failure of the American regional bank, Silicon Valley Bank, Swiss authorities had earlier this year advised UBS to proceed with acquiring its then-rival, Credit Suisse.
Mismanagement of Risk by Credit Suisse Leads to Penalties
The Federal Reserve released a statement confirming that it and the Bank of England had imposed fines on UBS. The penalties were a response to Credit Suisse’s consistent inability to “adequately manage” the risk associated with the U.S. family investment fund, Archegos.
The family hedge fund, overseen by Bill Hwang, collapsed severely, leading to significant losses for Credit Suisse. AFP reported that the financial damage amounted to an alarming $5.5 billion.
The Federal Reserve elaborated on the misconduct, labelling Credit Suisse’s “unsafe and unsound counterparty credit risk management practices” in its relationship with Archegos as the root cause. The fallout from these malpractices resulted in a consent order and fine for UBS totalling $268.5 million.
It was also disclosed that the Prudential Regulation Authority of the Bank of England had imposed further fines on the new owner of Credit Suisse. The combined penalties from the two regulatory bodies amounted to roughly $387 million.
The Federal Reserve concluded that its actions against UBS were coordinated with the Swiss Financial Market Supervisory Authority.
