£5.6m fine for Credit Suisse over mismarking

The UK Financial Services Authority has fined Credit Suisse £5.6 million for failing to stop mispricing by some of its structured credit traders.

The bank reported in February this year that it was taking a $2.85 billion writedown on its exposure to US subprime-related securities, specifically collateralised debt obligations of residential mortgage-backed securities. The trading team failed to update its pricing to take account of sharp drops in the portfolio's market value in the first quarter of the year.

The FSA's director of enforcement, Margaret Cole, said the mistake could have endangered the wider market. "The subsidiaries here failed to take appropriate steps to control the potentially high risk combination in the structured credit group’s holdings of exotic products, opaque valuations and high leverage. The sudden and unexpected announcement of the writedown had the potential to undermine market confidence."

Credit Suisse chief executive Brady Dougan said the deliberate mismarking "does not represent the high ethical standards of Credit Suisse".

See also: Credit Suisse sacks traders involved in mispricing
Credit Suisse reveals $2.85bn subprime credit writedown