UK's FSA fines Credit Suisse £5.6 million for control failings

Losses and Lawsuits

LONDON - The UK Financial Services Authority (FSA) has hit investment bank Credit Suisse with a £5.6 million fine for systems and controls failings. The FSA said the Swiss bank's London-based subsidiary had failed to conduct its operations with due care and diligence, breaching the regulator's Principles 2 and 3 by failing to organise and control its business effectively.

The fine is not the largest the regulator has administered but comes closely after the £4 million fine imposed on Winterflood securities for market abuse in July. Seen together with an increasingly proactive enforcement of UK mortgage industry standards, it points to something of a clampdown by the regulator. "The penalty reflects our tougher stance on enforcement and our policy of imposing higher penalties to achieve credible deterrence," says Margaret Cole, director of FSA enforcement.

Credit Suisse announced on February 19 that it had identified mis-marking and pricing errors by a number of traders. The resulting re-pricing of asset-backed securities wrote down $2.65 billion in revenues, only a week after the bank released its annual results for 2007.

The errors took place in the bank's structured credit group within its investment banking division. The bank broke the FSA's Principles 2 and 3 by failing to adequately supervise the business of the unit, not acting promptly once pricing concerns were identified, and failing to implement adequate systems or controls, allowing positions to remain wrongly valued for five months. The bank has since initiated a comprehensive review of systems and controls, and implemented remedial measures.

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