In a sign that Britain's financial regulator is tightening its grip on the banking sector, it fined Credit Suisse Group pound(s)5.6 million Wednesday for failing to sufficiently supervise trading activities.

Credit Suisse, the second-largest Swiss bank after UBS, agreed to pay the fine, the equivalent of $10.5 million and one of the largest assessed by the regulator, the Financial Services Authority, as part of a settlement. The agency ruled that the bank failed to put in place adequate controls to avoid pricing errors of some asset- backed securities and that once they happened it failed to detect them on time.

The incidents occurred in Credit Suisse's structured-credit group, mainly based in London, and led to a $2.65 billion write- down in February, just a week after the bank reported its full year results.

"It is imperative, particularly in more challenging financial conditions, that firms have in place appropriate systems and controls to manage their risks," Margaret Cole, the authority's director of enforcement, said in a prepared statement. "The penalty reflects our tougher stance on enforcement and our policy of imposing higher penalties to achieve credible deterrence."

The regulator is honing its enforcement powers after calls from some analysts to play a bigger role in ensuring the stability of the financial system. The fine on Credit Suisse is the biggest since Deutsche Bank had to pay pound(s)6.4 million more than two years ago. The largest fine was pound(s)17 million, imposed on Royal Dutch Shell for misstating its oil reserves. Credit Suisse, which fired the handful of traders in question, was initially fined pound(s)8 million before reaching a settlement for less.

The French Banking Commission fined Societe Generale euro 4 million, or almost $6 million, in July for "serious shortcomings" in internal controls in the debacle involving a former trader, Jerome Kerviel. Merrill Lynch earlier this year suspended a trader after discovering he may have mispriced some equity derivatives.

"Significant fines from the FSA are likely to become more common in future as they continue to try to make examples of firms in high profile cases where firms fail to meet the standards the FSA expects," said Simon Hart, partner at the London office of the law firm Reed Smith.

Shares of Credit Suisse fell 2.95 Swiss francs, or 5.4 percent, to close at 51.85 francs, or $47.76, in Zurich.

Brady Dougan, the bank's chief executive, said the mispricing was "unacceptable," adding, "Our overall control framework remains sound and we have taken actions to implement a remediation program to address the findings of our internal review."

Credit Suisse shocked investors on Feb. 19 when it announced that "a small number" of traders had mispriced some asset-backed securities, requiring the bank to take a write-down just a week after its fourth-quarter results indicated that it had been relatively unscathed by the turmoil in the credit markets. An internal investigation then found that the traders acted deliberately, and suggested personal gain as their motive.

Like many investment banks, Credit Suisse requires traders to value their trades on a daily basis. Their calculations are supervised by their managers and then crosschecked by independent controllers. The mispricings were detected during such a crosscheck, according to the bank.

The regulator said that Credit Suisse recognized the faulty prices about five months after they happened and that the "sudden and unexpected announcement of the write-down had the potential to undermine market confidence."

Separately, the New York Stock Exchange fined Credit Suisse $350,000 for a series of trading violations including inappropriately canceling orders at the close of trading.

Originally published by The New York Times Media Group.

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