The FSA says that a week after announcing its financial results in February, Credit Suisse announced it had identified mismarking and pricing errors by a small number of traders and that it was repricing certain asset-backed securities, leading to a £1.3bn writedown.
The regulator says the breaches of its principles related to the pricing of certain asset backed securities held by the Structured Credit Group within the firm’s investment banking division.
It says the subsidiary failed to adequately supervise the business of SCG and did not act in a timely way on concerns it had identified about the pricing of certain asset-backed positions.
Also, the FSA says adequate systems and controls were not put into place by the subsidiaries which meant it failed to recognise for around five months that certain SCG asset backed positions were wrongly valued.
Credit Suisse commissioned a detailed review of the causes of the write down and identified serious failures in the subsidiaries’ controls over the management of the SCG. Senior management accepted the findings of the review and a comprehensive remedial programme is being undertaken.
FSA director of enforcement Margaret Cole says: “The penalty reflects our tougher stance on enforcement and our policy of imposing higher penalties to achieve credible deterrence.
“It is imperative, particularly in more challenging financial conditions, that firms have in place appropriate systems and controls to manage their risks. 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 write down had the potential to undermine market confidence.”