Credit Suisse has been fined a record £87m by the Bank of England for “extremely serious” risk management failures.
The bank, which was subject to a forced takeover by Swiss rival UBS earlier this year, fell “well below” regulatory standards in its dealings with private investment firm Archegos Capital Management, officials said.
Credit Suisse lost $5.1bn (£4bn) when the hedge fund defaulted in March 2021.
Critics said the bank should have been more aware of the risks from Archegos as it borrowed huge sums to build up large and risky positions in a handful of companies.
The episode caused “significant financial and reputational damage” to Credit Suisse, officials said, while other lenders were also impacted – including UBS, which lost $861m (£671m).
It came as the US Federal Reserve simultaneously announced it was fining Credit Suisse $269m (£210m) over the same failures.
In a co-ordinated announcement, Switzerland’s financial regulator, FINMA, also criticised the bank’s behaviour and ordered corrective measures – although it does not issue fines.
An independent report previously criticised Credit Suisse’s conduct over the affair, saying its huge losses were the result of a “fundamental failure of management and control at its investment bank, and its prime brokerage division in particular.”
The fines, totalling almost £300m, will be paid by new owner UBS – and could be the first of several as Credit Suisse is set to face further legal battles in future.
UBS has vowed to tighten up operational and risk management discipline at Credit Suisse and said it intends to resolve remaining litigation in “the best interest of its stakeholders, including investors, clients and employees.”
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The fine is the largest ever issued by the Bank of England’s Prudential Regulation Authority (PRA).
It also marks the only time officials have established breaches of four of its “fundamental rules”, including not acting with due skill, care and diligence, as well as not having effective risk management strategies and controls.
Sam Woods, a BoE deputy governor and the CEO 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 [Credit Suisse International and Credit Suisse Securities].”
In a statement, the PRA said the failings were “symptomatic of an unsound risk culture within the business line that failed to balance considerations of risk against commercial reward appropriately.
“Broadly, this resulted in a failure by the firms to address the risk arising from Archegos’ portfolio, a confusion of responsibilities and failures to adequately respond when limit breaches were exceeded.
“The firms had failed to learn from past similar experiences and had insufficiently addressed concerns previously raised by the PRA.”