UBS, Credit Suisse face wider US probe over Russia sanctions -Bloomberg News

Reuters
Wed, September 27, 2023

UBS and Credit Suisse banks logos are seen in Zurich

ZURICH (Reuters) - UBS shares fell on Wednesday after a report that the U.S. Department of Justice has stepped up scrutiny into alleged compliance failures that helped Russian clients evade sanctions.

UBS declined to comment to Reuters when asked for a response to the Bloomberg News report, which said the alleged compliance failures related to UBS and Credit Suisse, which was taken over by its larger rival UBS earlier this year.

A full-scale investigation by the Department of Justice focusing mainly on Credit Suisse and potential sanctions violations was now underway, added the Bloomberg report, citing people familiar with the matter.

The Department of Justice declined to comment.

UBS, in its latest financial report at the end of August, said its sanctions programmes are designed to comply with sanctions across multiple jurisdictions, "including those imposed by the United Nations, Switzerland, the European Union, the UK and the United States".

Switzerland's largest bank also said in the report that Credit Suisse offices in Britain, Netherlands, France and Belgium, have been contacted by law enforcement officials as part of an investigation into cross border banking for rich clients, without giving details.

"Credit Suisse has conducted a review of these issues, the UK and French aspects of which have been closed, and is continuing to cooperate with the authorities," UBS added.

Trading in UBS shares was temporarily halted after they fell nearly 8% following the report. The Swiss bank's shares later recovered to trade 3.3% lower at 1500 GMT.

The Bloomberg report, citing people familiar with the matter, said the DOJ had spoken to U.S.-based lawyers for UBS about Credit Suisse's alleged exposure to sanctions violations since UBS acquired its smaller rival in June.

The DOJ is also looking into possible compliance failures at UBS, one of the people cited by Bloomberg said. The people also said the investigation was still in the early stages, and might not result in charges or a settlement.

Bloomberg's report said the DOJ probe covers restrictions imposed after Russia's 2022 invasion of Ukraine and previous rounds put in place following its 2014 annexation of Crimea.

JP Morgan said in a note that a DOJ investigation was a headwind to UBS, but the bank had built sufficient provisions to deal with any costs arising from the case.

UBS had litigation provisions of $4.7 billion at the end of June, while the bank could make a further $2.2 billion in provisions related to potential future litigation hits.

The Swiss bank has also adjusted its valuation of Credit Suisse by $3 billion to cover outflows related to contingent liabilities such as law suits.

"Overall, this is $6.8bn in provisions and $3bn in contingent liabilities i.e. nearly $10bn in litigation related buffer in our forecasts," JP Morgan said.

(Reporting by Shivani Tanna in Bengaluru and John Revill in Zurich; Editing by Krishna Chandra Eluri, Emelia Sithole-Matarise, Jane Merriman and Alexander Smith)