Credit Suisse has been hit with a record £87m fine by the Prudential Regulation Authority (PRA) for its failures relating to the collapsed hedge fund Archegos Capital.
The PRA criticised Credit Suisse’s “significant failures in risk management and governance” between the start of 2020 and the end of March 2021.
“This is the PRA’s highest fine and the only time a PRA enforcement investigation has established breaches of four PRA fundamental rules,” the PRA said.
Credit Suisse would have faced a a fine of £124.4m, but it was reduced after the bank agreed to resolve the issue rather than fight.
The fines are directed at Credit Suisse Securities and Credit Suisse International, which provided prime brokerage services to Archegos and entered equity total return swaps with the fund. The PRA said the risk management fell “well below the regulatory standards required”.
“The failings were found to be symptomatic of an unsound risk culture within the business line that failed to balance considerations of risk against commercial reward appropriately,” the watchdog said.
Sam Woods, chief executive of the PRA, said: “Credit Suisse’s failures to manage risks effectively were extremely serious, and created a major threat to the safety and soundness of the firms.
“The seriousness and widespread nature of those failures has led to today’s fine, which is the largest ever imposed by the PRA,” he continued.
The fines form part of a co-ordinated global penalty, including actions from the Swiss regulator Finma and the Federal Reserve, which will cost Credit Suisse over $387.5m.
UBS, which acquired Credit Suisse in March this year, has already agreed to pay off the fines. Earlier this year it revealed it had set aside $4bn for potential lawsuits relating to the takeover.
Archegos Capital, managed by investor Bill Hwang, made tens of billions through bets on US and Chinese stocks by borrowing extensively from banks.
However, these had to be unwound rapidly when the value of these companies fell and Archegos was unable to make margin calls.
Credit Suisse was one of the banks hardest hit by the collapse of Archegos, with the bank facing losses of around $5.5bn.
UBS said it “will implement its operational and risk management discipline and its culture across the combined organisation.”
“It has already begun implementing its risk framework, including actions addressing these regulatory findings, across Credit Suisse. UBS intends to resolve Credit Suisse’s outstanding litigation and regulatory matters in the best interest of its stakeholders, including investors, clients and employees,” the bank continued.
Credit Suisse was contacted for comment.