UBS Secures Crucial Waiver to Manage US Retirement Plans
Averting Crisis, US Labor Department Grants Exemption
The US Department of Labor has granted UBS a vital waiver, enabling the Swiss bank to continue managing over $11 billion in US retirement plans. This exemption comes after a five-month review, following a paperwork error that put the assets at risk.
Background: A Complex Merger
UBS acquired failed rival Credit Suisse in June 2023, inheriting its assets and liabilities. However, the bank’s conviction for crimes such as market rigging and tax fraud in France raised concerns about its ability to manage US pension plans.
The Waiver: A Conditional Reprieve
The US agency granted UBS a retroactive exemption, effective from June 2023, allowing it to operate as a qualified professional asset manager until June 2029. This reprieve is conditional upon UBS meeting certain requirements, including submitting an audit report by January 2024.
A Missed Deadline and Its Consequences
UBS missed the January 2024 deadline, prompting the Department of Labor to notify the bank that it had lost its waiver. This oversight forced UBS to adjust its US compliance team, including appointing a second compliance officer to oversee the waiver process.
The Fallout: Integration Challenges and Regulatory Hurdles
The episode highlights the immense challenges UBS faces in integrating Credit Suisse, the largest banking merger since the 2008 global financial crisis. The bank must navigate a complex web of paperwork and regulatory approvals to maintain its US operations.
Consequences of Non-Compliance
Without the waiver, UBS would likely be forced to exit the plan asset management business, incurring significant costs and potentially losing clients. The bank estimated at least $90 million in liquidation costs for clients.
Activist Opposition
A group of activists has been campaigning to bar UBS from the US pension market, citing the bank’s history of financial crimes. They argued that the bank’s application contained factual errors and requested a public hearing, which was denied.
A New Chapter for UBS
With the waiver secured, UBS can now focus on rebuilding trust and strengthening its US operations. The bank’s ability to navigate these challenges will be crucial in determining its future success.
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