The hedge fund crash that cost Credit Suisse $5.5 billion in 2021 just got one chapter shorter. The Fed quietly ended the cease-and-desist order tied to it. UBS, which inherited the mess, is finally off the hook for that piece.
On Friday, the Federal Reserve Board said it terminated its 2023 cease-and-desist order. The order covered UBS, Credit Suisse, and two New York Credit Suisse units.
The end date was May 12. The Fed told the world three days later.
This was not a fine being dropped. The $268.5 million UBS already paid stays paid. What ended was the watch leash. That's the part where the Fed told the bank what risk fixes to put in place and checked in close.
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Archegos was a family office run by Bill Hwang. A family office is a private firm that runs money for one rich family. Hwang's was using huge loans to bet on a small group of stocks like ViacomCBS.
In March 2021, those bets fell apart in a single week. The banks that lent to Archegos got hit hard. Credit Suisse got hit worst of all. The loss came in near $5.5 billion. That's about a year of profits for the firm.
The Fed's 2023 order called Credit Suisse's risk work "unsafe and unsound." UBS paid about $387 million across all the watchdogs to close the case. $268.5 million went to the Fed. The rest was split between the U.K. and Swiss watchdogs.
The Archegos cleanup has been a slow drag on UBS since it bought Credit Suisse in June 2023. The deal was forced by the Swiss government to stop a wider bank panic. The end of this cease order frees UBS from one of its more pushy U.S. watch rules. That rule gave Fed staff a deep look at how the firm runs its trading risk. UBS CEO Sergio Ermotti has spent the last three years cleaning up the legal tab from the old Credit Suisse. He's said the cleanup is most of the way through. But not done.
The U.S. file isn't fully closed. The Swiss capital rules talks, the U.S. wind-down plans, and other open items tied to the deal are still on UBS's plate. The bank is still working through the rest of the legacy book.
UBS stock has rallied since the Credit Suisse deal closed. Investors have warmed to the cleanup story. The bank's market value is up sharply from where it sat in 2023. Each new "closed" item on the legal tab is a quiet boost to that story. Friday's Fed note is the latest one.
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