Credit Suisse fined 335 million Swiss francs for Archegos collapse

Swiss bank UBS must pay 335 million Swiss francs in fines to authorities in the United States and United Kingdom, after financial regulators found the company's recently merged sister bank, Credit Suisse, responsible for the mismanagement of risks leading up to the collapse of US investment firm Archegos Capital Management. 

Investigation slams Swiss bank’s failure to manage risks

According to 20 Minuten, with the guidance of Credit Suisse, the Archegos fund took high-risk gambles on the stock market, which were financed through loans from banks. However, the firm soon became unable to hedge its positions when markets tumbled in 2021, leading to its collapse in March of the same year.

The collapse of the fund cost Credit Suisse more than 4 billion Swiss francs at the time, and Archegos founder Bill Hwang was indicted on federal charges of fraud and racketeering in the US in 2022.

UK and US authorities issue fine to Credit Suisse

For its part, the Swiss financial regulator Finma stated that "Credit Suisse had seriously and systematically violated the rules of financial market law in the context of its business relationship with Archegos." It has now ordered Credit Suisse and UBS to take corrective measures that include reforms to its risk management and compensation culture.

Now, a joint decision by UK and US authorities has held Credit Suisse accountable for inadequate risk management in its dealings with Archegos, and fined the company 335 million francs.

“Credit Suisse's failure to effectively manage risk has been extremely serious and has created a major threat to the safety and soundness of businesses. The seriousness and widespread nature of these breaches led to today's fine,” Prudential Regulatory Authority (PRA) boss Sam Woods said in the statement.

UBS to pay Credit Suisse fine

The fine is made up of two components - 232 million Swiss francs owed to US authorities and 96 million francs owed to the PRA in the UK. It is the largest fine ever to be issued by the UK’s PRA. 

However, the fine comes just months after UBS completed its acquisition and merger with Credit Suisse, meaning it will be up to UBS to actually pay the fine - something it agreed to do in a statement released on July 25. The merger cost UBS around 3 billion Swiss francs to complete, with the company now having to pay the hefty 335-million-franc fine on top. 

Image: Shutterstock.com / Michael Derrer Fuchs