UBS Takes a $268 Million Hit for 'Credit Suisse Misconduct'

The U.S. Federal Reserve has hit Swiss bank UBS (UBS) with a $268.5 million fine over "misconduct" by its rival, Credit Suisse, before the two merged in March.

The Federal Reserve Board announced a consent order and fined UBS Group AG of Zurich, Switzerland, for misconduct by Credit Suisse. The latter was acquired by its Swiss rival after a period of turmoil in March.

The misconduct charge was levied against Credit Suisse for "unsafe and unsound counterparty credit risk management." The Fed said the bank's practices with former counterparty Archegos Capital Management LP breached its fair conduct rules.

With additional fines from the Swiss Financial Market Supervisory Authority and the Bank of England's Prudential Regulation Authority (PRA), also revealed today, the total cost to UBS is expected to be around $387 million.

Credit Suisse was hit by $5.5 billion in losses after the investment fund Archegos, founded by former Tiger Management analyst Bill Hwang, collapsed with $20 billion in losses. Regulators said Credit Suisse failed to manage the risk posed by Archegos despite repeated warnings.

Credit Suisse's CEO and chief risk manager both stepped down after the company announced a $252 million quarterly drop attributed to third-party losses.

"Credit Suisse’s failures to manage risks effectively were extremely serious and created a major threat to the safety and soundness of the firms," said Sam Woods, CEO of the Bank of England's PRA. "The seriousness and widespread nature of those failures has led to today’s fine, which is the largest ever imposed by the PRA.”

Despite the record fines, UBS shares were higher on the day by 0.75%.