The Prudential Regulation Authority (PRA), part of the Bank of England, has assessed a “record fine” on Credit Suisse due to its exposure to Archegos Capital Management.
Archegos collapsed spectacularly in 2022 leaving losses of billions of dollars. The failure has led to both criminal and civil charges filed against the firm and its principle. The US Securities and Exchange Commission described Archegos as a “house of cards.”
The US Department of Justice filed charges against Sung Kook (Bill) Hwang, the founder and head of Archegos, and Patrick Halligan, Archegos’s Chief Financial Officer, alleging racketeering conspiracy, securities fraud, and wire fraud offenses in including schemes to “unlawfully manipulate the prices of publicly traded securities.”
PRA has fined Credit Suisse International and Credit Suisse Securities Ltd £87 million for “significant failures in risk management and governance.” PRA states this is the largest financial penalty it has ever issued. The PRA action is part of a co-ordinated global resolution including both the Swiss Financial Market Supervisory Authority (FINMA) and the Federal Reserve Board.
PRA states:
“The Firms provided prime brokerage services and entered into equity total return swaps (TRS) with Archegos. All such TRS positions were remotely booked into the Firms in the UK via other entities in the Credit Suisse group. When Archegos defaulted in March 2021, around US$5.1 billion of losses were booked to the Firms. These losses for Credit Suisse resulted in significant financial and reputational damage. Credit Suisse was ultimately acquired by UBS Group AG (UBS) in 2023.”
UBS completed the acquisition of Credit Suisse on June 12, 2023.
