UBS is making headlines almost on a weekly basis with scandals and financial misdeeds inherited from Credit Suisse. Looking ahead, headline writers are unlikely to be any less busy.
Although the big bang failed to materialize today, it's likely to be coming soon. According to media reports, regulators in Switzerland, the US, and the UK have been working their way through the thicket of the Archegos debacle. Credit Suisse, which was involved in the bankruptcy of the New York-based financial firm in the spring of 2021, is facing hundreds of millions of dollars in fines.
Theory versus Practice
That, at least, is the theory. In practice, with its takeover of Credit Suisse in March, UBS assumed the legal risks of the troubled bank. In the course of the takeover, buyer UBS set aside around $4 billion in additional provisions to arm itself against Credit Suisse's troubled past.
In view of the potential fines, Credit Suisse set aside a relatively meager $35 million to cushion possible Archegos-related fines, as the «Financial Times» reported (behind paywall). Credit Suisse's dark past is becoming part of UBS's new present.
Swiss Attorney General Investigates
UBS lawyers requested a London court a lawsuit filed by the Republic of Mozambique against Credit Suisse be dismissed in which the bank and other parties are accused of wrongdoing in brokering loans and bonds worth $2 billion for the African country in 2013.
Meanwhile, another civil suit is set for September in the UK. Investors who bought over $600 million worth of the «Tuna Bonds» filed the claims in London in late 2020. In the same year, the Office of the Attorney General of Switzerland opened criminal proceedings on suspicions of money laundering to shed more light on the Mozambique scandal. The charges are being brought against unknown persons.
Bermuda Verdict Expected Soon
Meanwhile, billionaire Georgian ex-prime minister Bidzina Iwanishvili won another victory in his extended campaign against Credit Suisse in a Singapore court. In May Credit Suisse was ordered to pay him hundreds of millions of dollars in compensation in a ruling the bank plans to appeal.
Under the then-leadership of general counsel Markus Diethelm, once UBS's chief lawyer, Credit Suisse recently tried to quickly settle a dispute with oligarchs defrauded by former Credit Suisse banker Patrice Lescaudron. A verdict is expected to be handed down by a Bermuda court by the end of the first half of the year, proceedings which have already cost Credit Suisse more than $600 million in damages.
At home, the Geneva prosecutor's office continues to push ahead with criminal proceedings against the bank related to the case. In April Credit Suisse scored a victory, succeding in the Swiss federal court by narrowing the scope of investigators.
Sword of Damocles
Meanwhile, the US Senate is pressing for a new tax fraud investigation against Credit Suisse in response to tips from whistleblowers, leaving yet a sword of Damocles hanging over Barbara Levi, the legal chief of the combined UBS Group.
On top of that are the various private class action lawsuits filed in the US over Archegos debacle and Credit Suisse's Greensill funds, along with as those related to statements made by Credit Suisse management during the last months before the rescue bank.
Even if the Credit Suisse integration can be completed on schedule by the end of 2027, the legacy of the legal entanglements will probably occupy UBS for many years to come.
