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UBS to Face Penalties Over Credit Suisse's Archegos Debacle
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With UBS Group AG (UBS - Free Report) buying its former rival Credit Suisse Group AG, the company has attracted Credit Suisse’s litigation portfolio. Per a Bloomberg article that cited people with knowledge of the matter, UBS is likely to face millions of dollars in regulatory fines over Credit Suisse’s dealings with Archegos Capital Management.
In March 2021, Archegos, a family office founded by Bill Hwang, defaulted on its loan relationships with Credit Suisse after a notable decline in the value of its positions. Credit Suisse was slow to unwind related positions. This resulted in $5.5-billion losses related to that business in 2021, along with job losses, resignations and regulatory actions. UBS had suffered a relatively smaller loss related to the dealings with Archegos.
Per people with knowledge of the matter, the US Federal Reserve may fine more than $300 million, while the U.K.’s Prudential Regulation Authority can impose a penalty of up to £100 million. Nonetheless, Switzerland’s financial regulator does not have the authority to impose fines.
In mid-May, UBS announced that it kept aside $4 billion for potential litigation and regulatory costs. This is likely to cover part of the potential fines to be imposed related to the dealings of Archegos.
Moreover, UBS had projected a negative impact of $13 billion on its shareholders’ equity from fair value adjustments of the combined group's financial assets and liabilities.
UBS’s shares have gained 26.5% on the NYSE over the past year compared with the industry’s rise of 15.1%.
Earlier, it was reported that post acquisition, UBS expected to downsize Credit Suisse’s investment banking (IB) unit, which was at the center of the Archegos debacle.
Recently, a Bloomberg article indicated that UBS is planning to cut IB jobs at Credit Suisse next month, specifically in the Asia Pacific region, where the two banks have most of the overlapping presence.
Amid the muted environment for deal making, many others, including TheGoldman Sachs Group, Inc. (GS - Free Report) and Citigroup (C - Free Report) , have been taking similar steps in their IB divisions.
GS is eliminating more than 30 IB positions in the Asia region to survive the current uncertain economic conditions. The company's Global Banking & Markets division has witnessed the majority of the regional job cuts.
Also, C will likely cut 30 IB jobs and 20 more in its corporate banking unit in London. Per a person familiar with the matter, the cuts are necessary to reduce its cost base, as the bank navigates through adverse market conditions.
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UBS to Face Penalties Over Credit Suisse's Archegos Debacle
With UBS Group AG (UBS - Free Report) buying its former rival Credit Suisse Group AG, the company has attracted Credit Suisse’s litigation portfolio. Per a Bloomberg article that cited people with knowledge of the matter, UBS is likely to face millions of dollars in regulatory fines over Credit Suisse’s dealings with Archegos Capital Management.
In March 2021, Archegos, a family office founded by Bill Hwang, defaulted on its loan relationships with Credit Suisse after a notable decline in the value of its positions. Credit Suisse was slow to unwind related positions. This resulted in $5.5-billion losses related to that business in 2021, along with job losses, resignations and regulatory actions. UBS had suffered a relatively smaller loss related to the dealings with Archegos.
Per people with knowledge of the matter, the US Federal Reserve may fine more than $300 million, while the U.K.’s Prudential Regulation Authority can impose a penalty of up to £100 million. Nonetheless, Switzerland’s financial regulator does not have the authority to impose fines.
In mid-May, UBS announced that it kept aside $4 billion for potential litigation and regulatory costs. This is likely to cover part of the potential fines to be imposed related to the dealings of Archegos.
Moreover, UBS had projected a negative impact of $13 billion on its shareholders’ equity from fair value adjustments of the combined group's financial assets and liabilities.
UBS’s shares have gained 26.5% on the NYSE over the past year compared with the industry’s rise of 15.1%.
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UBS carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here
Earlier, it was reported that post acquisition, UBS expected to downsize Credit Suisse’s investment banking (IB) unit, which was at the center of the Archegos debacle.
Recently, a Bloomberg article indicated that UBS is planning to cut IB jobs at Credit Suisse next month, specifically in the Asia Pacific region, where the two banks have most of the overlapping presence.
Amid the muted environment for deal making, many others, including The Goldman Sachs Group, Inc. (GS - Free Report) and Citigroup (C - Free Report) , have been taking similar steps in their IB divisions.
GS is eliminating more than 30 IB positions in the Asia region to survive the current uncertain economic conditions. The company's Global Banking & Markets division has witnessed the majority of the regional job cuts.
Also, C will likely cut 30 IB jobs and 20 more in its corporate banking unit in London. Per a person familiar with the matter, the cuts are necessary to reduce its cost base, as the bank navigates through adverse market conditions.