The PRA imposes record fine of
The PRA action is part of a co-ordinated global resolution, incorporating action by the
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
The Firms' risk management oversight and practices fell well below the regulatory standards required. The failings were found to be 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.
'Credit Suisse's failures to manage risks effectively were extremely serious, and created a major threat to the safety and soundness of the firm. The seriousness and widespread nature of those failures has led to today's fine, which is the largest ever imposed by the PRA.'
As a result, the Firms breached Fundamental Rules 2, 3, 5 and 6 of the PRA Rulebook. Fundamental Rule 2 requires that a firm to conduct its business with due skill, care and diligence. Fundamental Rule 3 requires that a firm must act in a prudent manner. Fundamental Rule 5 requires that a firm must have effective risk strategies and risk management systems. Fundamental Rule 6 requires that a firm must organise and control its affairs responsibly and effectively. This all resulted in the Firms failing to:
Instil a culture within the investment banking division that appropriately balanced the considerations of risk against commercial reward;
Evaluate and take due account of the risks to the Firms, and the
Appropriately escalate the risks within Archegos' portfolio with the result that there was inadequate oversight in the
Take sufficient steps to implement an effective risk mitigation strategy in respect of Archegos' portfolio. Including a failure to take reasonable steps to reduce risk when it would have been prudent to do so; and
Have a governance framework that adequately scrutinised or discussed the risks posed to the Firms by Archegos' portfolio
The Firms agreed to resolve this matter and therefore qualified for a 30% reduction in the fine imposed by the PRA. Without this discount, the fine imposed by the PRA would have been
Notes to editors
PRA Final Notice Opens in a new window
FINMA notice Opens in a new window
The Federal Reserve Board Opens in a new window separately imposed a fine of
CSI and CSSEL were Category 1 PRA-authorised firms during the Relevant Period, meaning that they had the capacity to cause significant disruption to the
The Firms have been fined
Dear CEO letter Supervisory review of global equity finance businesses Opens in a new window
The PRA's statutory powers and enforcement.
This enforcement action has been taken in accordance with the PRA's existing statutory powers and approach to enforcement policy Opens in a new window. The proposed new approach to enforcement set out in consultation paper CP9/23 is not yet in force and remains subject to consultation until
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