The News
A trader who was fired from Credit Suisse after the bank lost billions of dollars on the now-infamous collapse of a major client in 2021 won his case Tuesday against his former employer and is owed $8.7 million in back wages.
Paul Galietto was among at least nine senior executives who were fired after Credit Suisse lost $5.5 billion from the failure of Archegos Capital Management, the investment firm run by Bill Hwang, who was later convicted of defrauding his bankers. Other Wall Street banks lost money, too, but Credit Suisse was especially hard hit. The bank was more aggressive in extending credit and slower to liquidate its positions.
UBS, which rescued Credit Suisse in 2023 from a series of mounting management blunders including Archegos, was ordered Tuesday to pay Galietto $8.7 million it had clawed back after his firing, according to a person familiar with the matter.
UBS has already paid more than $380 million to regulators in the US and UK for compliance lapses around its dealings with Archegos. It is now under pressure from Swiss regulators to raise billions of dollars in capital in issues unrelated to Archegos, a request the company is fighting — noting that they were pressured to save Credit Suisse over a frantic weekend when its collapse seemed imminent.
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Liz’s view
Bank rescues have long tails. Just ask JPMorgan’s Jamie Dimon, who has said he wouldn’t rescue Bear Stearns again, as he did in 2008, if he had known how much it would cost and the regulatory scrutiny it would bring. JPMorgan ultimately paid more than $10 billion in fines related to Bear Stearns’ pre-collapse activities.
But Dimon could easily absorb those costs. The costs of UBS’s shotgun marriage to Credit Suisse are more than an annoyance. They have brought Switzerland’s national banking champion to a face-off with its Swiss regulator, and sparked musings that UBS might leave the country altogether and try to redomicile elsewhere. And as salt in the wound, UBS is writing a check to someone Credit Suisse fired.
A spokesman for UBS declined to comment. Galietto couldn’t be reached.
Room for Disagreement
Even so, UBS got the deal of the century, a team of Dutch, Swiss, and British researchers found in a post-mortem of the Credit Suisse deal. Government liquidity backstops and loss guarantees were generous enough for them to dub the takeover “Helvetia’s Gift.”
“We argue that the exclusion of competitive bidding, imposed by the government, and the relatively late intervention of the regulator have led to an unexpectedly favorable deal for the acquirer, UBS,” they wrote last year.
Notable
- Read Credit Suisse’s own post-mortem report on its Archegos failings, prepared by law firm Paul Weiss. “The business was focused on maximizing short-term profits and failed to rein in and, indeed, enabled Archegos’s voracious risk-taking,” it found.