Author: Stefania Spezzati and Ariane Luthi
LONDON (Reuters) - The U.S. Labor Department has granted UBS Group AG the exemption it needs to continue managing U.S. retirement plans after a paperwork error put $11 billion of assets it oversees at risk, documents showed.
Following a five-month review, UBS can now rely on its status as a qualified professional asset manager in the United States until June 2029, the U.S. agency said in a notice published on Wednesday.
The exemption, first reported by Reuters, applies retroactively from June 2023 when the bank takes over collapsed rival Credit Suisse.
UBS needs the exemption to serve U.S. pensioners because the bank has been convicted of market manipulation and tax fraud in France in recent years.
The agency said UBS teams operating in the U.S. pension market should remain isolated from the convicted UBS and Credit Suisse entities and trusted to protect assets.
UBS has been operating under the exemption since 2013 and was told it could get a new merger exemption after the Credit Suisse merger, subject to meeting certain conditions, including submitting an audit report by January 2024.
UBS missed the deadline, according to a hundreds-page notification document reviewed by Reuters.
In early 2024, the department informed UBS that the bank appeared to have lost its exemption, the letter showed.
However, correspondence between the bank and the U.S. agency in July showed that the error took several months to be fixed.
The incident provides a rare glimpse into the massive challenges UBS faces in integrating Credit Suisse, the biggest banking merger since the 2008 global financial crisis, and highlights the grueling paperwork and regulatory approvals it needs to obtain and maintain. district.
The missed deadline forced UBS to make changes to its U.S. compliance team, including appointing a second compliance officer to oversee the exemption process, according to a July 29 letter from UBS's legal representatives to U.S. agencies.
In its letter, UBS said it "deeply regrets its oversight" and that the delay was "unacceptable," while noting that the Credit Suisse integration had been "the subject of intense and difficult efforts." It also said that "without the exemption, many clients would leave UBS."
A UBS spokesman declined to comment. Representatives for the U.S. Department of Labor did not respond to requests for comment.
The mistake puts UBS at risk of losing a business that manages more than $11 billion in assets, a key part of the bank's asset management business.
Without the exemption, "UBS may be forced to exit the plan asset management business," the bank's law firm told the U.S. agency in late July.
The bank estimates liquidation costs for customers to be at least $90 million.
The bank has spent "hundreds of hours" reviewing more than 16,000 transactions since June 2023 and said 300 to 400 loans were not covered by the alternative exemption.
The July 29 letter showed it did not estimate the size of the loan.
A group of activists has been campaigning to ban UBS from the U.S. pensions market due to "serious financial crimes" committed by UBS and Credit Suisse, according to letters submitted to U.S. agencies by the group and reviewed by Reuters.
Activists said the bank's application contained "numerous factual errors" and asked the agency to hold a public hearing, but the request was denied.
(Reporting by Stefania Spezzati and Ariane Luthi; Editing by Elisa Martinuzzi and Tomasz Janowski)