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Structured failings cost Credit Suisse £5.6m fine

The FSA has fined the UK operations of Credit Suisse £5.6m for failing to properly supervise a structured product group in its investment banking division.

The fine relates to the mispricing of asset-backed securities which Credit Suisse ann- ounced it had become aware of on February 19, a week after reporting its financial results. Repricing of the assets led to a £1.3bn writedown.

The regulator says that the investment division failed to adequately supervise the business of its structured cre- dit group and did not act in a timely way on concerns the division had identified about the pricing of certain asset-backed positions.

It 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.

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, partic- ularly 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.

Credit Suisse chief exec- utive Brady Dougan says: “This incident was unacceptable to myself and the executive board. It does not represent the high ethical standards of Credit Suisse.

“Our overall control framework remains sound and we have taken actions to implement a remediation program to address the findings of our internal review.”

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