By Stefania Spezzati and Ariane Luthi
LONDON (Reuters) – The U.S. Department of Labor granted UBS a waiver the Swiss bank needs to continue managing U.S. retirement plans after a paperwork error had put the $11 billion of assets the lender oversees at risk, documents show.
After a five-month review, the U.S. agency said in a notice published on Wednesday that UBS can now rely on its status of qualified professional asset manager in the U.S. until June 2029.
The exemption, first reported by Reuters, is retroactive and applies from June 2023 when the bank took over failed rival Credit Suisse.
UBS needs the waiver to service U.S. pensioners because in recent years the bank has been convicted of crimes including market rigging and tax fraud in France.
The agency said UBS teams operating in the U.S. pension market should remain insulated from the convicted UBS and Credit Suisse entities and trusted to safeguard assets.
UBS, which had been operating under an exemption since 2013, was told that it could obtain a new combined waiver after the Credit Suisse merger, subject to meeting certain conditions, including submitting an audit report by January 2024.
UBS missed that deadline, according to the notice documents contained in a bundle that runs into hundreds of pages and was reviewed by Reuters.
In early 2024, UBS was told by the Department that the bank appeared to have lost its waiver, according to the correspondence.
However, it took months for the error to get fixed, correspondence between the bank and the U.S. agency from July shows.
The episode offers a rare glimpse into the enormous challenges UBS faces in integrating Credit Suisse – the biggest banking merger since the global financial crisis of 2008 – and highlights the minefield of paperwork and regulatory approvals it needs to obtain and maintain.
The missed deadline forced UBS to adjust its U.S. compliance team including naming a second compliance officer to oversee the waiver process, according to a letter from a UBS legal representative to the U.S. agency dated July 29.
In its correspondence, UBS has said it “deeply regrets its oversight” and that the delay was “unacceptable”, while noting that the integration of Credit Suisse has been “the subject of intense and demanding efforts.” It also said that “without exemption many clients would leave UBS.”
A spokesperson for UBS declined to comment. A representative for the U.S. Department of Labor did not respond to a request for comment.
The misstep put UBS at risk of losing a business managing more than $11 billion, a key part the bank’s asset management business.
Without the waiver, “UBS likely would be forced to exit the plan asset management business,” the bank’s law firm told the U.S. agency in late July.
The bank had estimated at least $90 million in liquidation costs for clients.
The bank took “hundreds of hours” to review more than 16,000 transactions since June 2023 and said that a group of 300 to 400 loans was not covered by alternative exemptions.
It did not estimate the size of the loans, the July 29 correspondence shows.
A group of activists has been campaigning to bar UBS from the U.S. pension market given the “serious financial crimes” committed by UBS and Credit Suisse, correspondence submitted by the group to the U.S. agency and reviewed by Reuters shows.
The activists said that the bank’s application had “innumerable factual errors” and asked the agency to hold a public hearing, a request which was however turned down.
(Reporting by Stefania Spezzati and Ariane Luthi; editing by Elisa Martinuzzi and Tomasz Janowski)
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