On July 24, the Federal Reserve Board made an announcement regarding a consent decree and significant fines of $268.5 million for the Swiss international investment bank UBS Group AG. The violation was committed by Credit Suisse, which was acquired by UBS in June of 2023, according to a press release. The penalty was imposed as a consequence of these violations. Credit Suisse violated the guidelines it sets for managing counterparty credit risk with the infamous hedge fund Archegos Capital Management LP, which is at the center of the scandal.
The consent order issued by the Federal Reserve Board mandates that the boards of directors of UBS and CS USA must develop, approve and put into action comprehensive strategies to ensure compliance with the order. There will be a requirement for quarterly reports on the progress of putting these plans into action. Those who are found accountable for inappropriate behavior are barred from holding similar jobs in the future as a result of the order. The banks are obligated to offer the Board of Governors their full cooperation in any inquiries that may be conducted regarding this matter.
2021 marked the beginning of Credit Suisse's difficulties, which were brought on by the investment firm Archegos, which resulted in enormous losses of approximately $5.5 billion.
Violations of the Consent Order include not having an adequate margin from Archegos, not having clearly defined roles and responsibilities and not having efficient reputational risk review mechanisms. Credit Suisse was condemned for having inadequate data quality management as well as a delay in addressing breaches of internal restrictions, both of which hurt the firm's risk indicators. Credit Suisse was also criticized for having bad customer service.
UBS issued a statement in response to the conclusions of the regulatory agency, in which it stated that "it has already begun implementing its risk framework, including actions addressing these regulatory findings across Credit Suisse." UBS has the intention of resolving all of Credit Suisse's outstanding legal actions and regulatory investigations in a manner that will be to the advantage of the company's shareholders, customers and employees.