The UK financial watchdog has slapped a £5.6m fine on Credit Suisse, one of its largest-ever censures, after the bank failed to prevent traders deliberately mispricing assets, which led to shock writedowns earlier this year.
The Financial Services Authority announced yesterday that it had fined Credit Suisse's UK operations for "failing to conduct their business with due skill, care and diligence and failing to organise and control their business effectively".
This is the bank's second serious payout to the regulator, after the FSA fined it £4m over attempts to mislead Japan's regulatory and tax authorities in 2002.
Margaret Cole, its director of enforcement, said: "The penalty reflects our tougher stance on enforcement and our policy of imposing higher penalties to achieve credible deterrence."
Credit Suisse revealed the trading problems just days after releasing its annual results in February. The group said it had identified a series of mismarking and pricing errors by some of its traders, but inadequate systems meant it had not recognised the problems for five months.
Initially the bank thought the traders had made mistakes, but later uncovered evidence that some had deliberately used out-of-date data to artificially inflate the value of their positions.
Brady Dougan, Credit Suisse chief executive, described the situation as "unacceptable". He added: "We are pleased to settle with the FSA, so we can now move forward."
The move to re-price some of these asset-backed securities led the bank to write down the value of its assets by $2.65bn (£1.41bn) in February, after it had suspended the traders. Ms Cole said: "The sudden and unexpected announcement of the writedown had the potential to undermine market confidence."
Credit Suisse launched a review after the writedown following the shock news, which was released in March. It identified serious failures in controls, and has undertaken to overhaul its systems and operations.
This is the fourth-largest fine ever imposed by the FSA, although the bank's co-operation and agreement to settle early meant the sum was reduced from £8m to £5.6m.
The largest fine – £17m – was issued to Royal Dutch Shell for market abuse. The FSA cited Shell's "unprecedented misconduct" after it mis-stated its reserves. The largest fine for a bank breaching the same regulations as Credit Suisse was imposed on Citigroup in 2005, with a censure that totalled £13.9m after its so-called "Dr Evil" bond trades.
Separately yesterday, the New York Stock Exchange announced it had fined Credit Suisse $350,000 for violating exchange rules by trading ahead of customer orders between 2005 and 2007.