© Reuters. FILE PHOTO: The logo of Credit Suisse is seen outside its office building in Hong Kong, China, August 8, 2023. REUTERS/Tyrone Siu/File Photo
By Noele Illien and Kirstin Ridley
ZURICH (Reuters) -Credit Suisse has reached an 11th-hour out-of-court settlement with Mozambique over the decade-old $1.5 billion-plus “tuna bond” scandal, the Swiss bank’s new owner UBS said on Sunday, drawing a line under a damaging dispute it inherited.
“The parties have mutually released each other from any liabilities and claims relating to the transactions,” UBS said in a statement. “The parties are pleased to have resolved this long-running dispute,” it added without giving further details.
Under the deal, struck one day before a three-month London civil trial was due to start, UBS will forgive part of a loan that Credit Suisse made to Mozambique in 2013, representing less than $100 million, said one source familiar with the situation, who declined to be named because the terms are not public.
In Maputo, the Mozambican Attorney General’s Office and Ministry of Economy and Finance said they were calling a joint news conference for Monday morning.
The tuna bond case dates back to deals between state-owned Mozambican companies and shipbuilder Privinvest – funded in part by loans and bonds from Credit Suisse and backed by undisclosed Mozambican government guarantees in 2013 and 2014 – ostensibly to develop the fishing industry and for maritime security.
But hundreds of millions of dollars went missing and, when the government debt came to light in 2016, donors such as the International Monetary Fund temporarily halted support, triggering a currency collapse, defaults and financial turmoil.
The settlement included most of the creditors involved in funding a 2013 loan to ProIndicus, a state-owned Mozambican company, UBS said.
DRAWING A LINE
UBS, which took over scandal-scarred Credit Suisse amid turmoil in the global banking sector earlier this year, has pledged to resolve Credit Suisse’s legacy legal disputes.
Since completing the mega merger on June 12, it has paid $388 million to U.S. and British regulators over dealings with collapsed private investment firm Archegos Capital Management and settled a dispute with a finance blog.
The latest settlement leaves French shipping mogul Iskandar Safa and his Privinvest group among key remaining defendants in a High Court battle over the funding and maritime deals that have already triggered U.S. and Mozambican criminal proceedings.
Mozambique has alleged it was the victim of a conspiracy and that Privinvest paid bribes to corrupt Mozambican officials and Credit Suisse bankers, exposing the country to a potential liability of at least $2 billion.
Privinvest has alleged it delivered on all of its obligations under the contracts and that any payments it made were either investments, consultancy payments, legitimate remuneration or legitimate political campaign contributions.
The company did not immediately respond to a request for comment.
In another twist to the complex case, Privinvest on Friday secured permission to appeal against a London High Court decision to grant Mozambican President Filipe Nyusi immunity from the proceedings. Privinvest has argued that if it is found liable, Nyusi should contribute to any damages.
Officials in the Maputo government did not immediately respond to a request for comment.
Court of Appeal Judge Elizabeth Laing said it was now up to the trial judge to grant any applications for adjournment, a decision seen by Reuters over the weekend showed.
In 2021, Credit Suisse agreed to pay about $475 million to British and U.S. authorities to resolve bribery and fraud charges and has pledged to forgive $200 million of debt owed by Mozambique.
It has alleged three former bankers, who arranged the bonds and have pleaded guilty in the United States to handling kickbacks, hid their misconduct from the bank.
JPMorgan CEO Jamie Dimon warns of recession and high interest rates
NEW YORK – JPMorgan Chase (NYSE:) CEO Jamie Dimon has issued a stark warning about the potential for a global economic downturn, emphasizing the need for preparedness amid rising inflation and economic headwinds. According to media reports today, Dimon cautioned that high-interest rates, which could peak at 7%, may lead to a soft landing or even a mild recession as the global economy seeks to stabilize after the pandemic.
Dimon pointed out that while the U.S. has managed to avoid a recession throughout 2023, it’s crucial not to expect an endless economic boom. He highlighted that severe risks stemming from the pandemic’s aftermath could significantly impact both U.S. and global markets. Wall Street and international investors are paying close attention to Dimon’s experienced-based insights as they face an uncertain financial climate.
Further complicating the economic landscape, Dimon drew attention to the U.S. economy’s “addiction” to debt and central bank liquidity injections, likening it to “heroin.” He argued that pandemic-era stimulus measures have created an economic “sugar high,” with artificially boosted consumer spending and stock market values. Although these efforts helped prevent a depression, he warned against underestimating the persistence of inflationary pressures and anticipates more interest rate hikes.
Dimon also suggested that significant drops in global corporate profits could be on the horizon as economies attempt to return to normalcy without government stimulus. Additionally, he underscored geopolitical tensions, particularly in the Middle East, as potential triggers for market disruptions that could further complicate the economic recovery.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
China has more space to cut reserve ratio instead of interest rates, says ex-official
© Reuters. FILE PHOTO: Paramilitary police officers stand guard in front of the headquarters of the People’s Bank of China, the central bank (PBOC), in Beijing, China September 30, 2022. REUTERS/Tingshu Wang/File Photo
BEIJING (Reuters) – China is likely to implement proactive fiscal policy next year as there is still a need for the world’s second-biggest economy to realise stable growth, a former central banker was cited as saying in state-owned media on Sunday.
The comment comes as the economy struggles for momentum after being hobbled by lengthy pandemic-busting measures, while market watchers fear severe debt woe among major property developers could spill over to other sectors.
“It is expected that next year China will continue to implement positive fiscal policy, monetary policies that are in line with positive fiscal policy, with a relatively large policy space to lower the reserve requirement ratio,” Sheng Songcheng, a former statistics and analysis director of the People’s Bank of China, said in comments reported by Shanghai Securities News.
With interest rates and loan prime rates at low levels, there is more space to cut banks’ reserve requirement ratio (RRR) than to cut interest rates, Sheng said.
The central bank lowered the RRR in September for the second time this year to boost liquidity and support economic recovery. Analysts expect another cut by year-end.
The weighted average RRR for financial institutions was around 7.4% after the cut.
China is prudent in cutting interest rates as its monetary policy needs to consider internal and external balance, Sheng said.
“It is expected that the interest rate differential between China and the U.S. will enter a period of stabilisation, so the (yuan) is likely to maintain a mild appreciation trend, but the appreciation is limited.”
‘Way too early’ to declare victory over inflation, says ECB’s Nagel
© Reuters. Joachim Nagel, President of Germany’s federal reserve Bundesbank addresses the media during the bank’s annual news conference in Frankfurt, Germany March 1, 2023. REUTERS/Kai Pfaffenbach/File Photo
NICOSIA (Reuters) – Euro zone inflation will carry on declining in the months ahead but at a slower pace, Bundesbank President Joachim Nagel was quoted as telling Cypriot newspaper Kathimerini on Sunday.
Euro zone inflation eased to 2.4% in November from 2.9% in October, well below expectations for a third straight month and fuelling market speculation that European Central Bank (ECB) rates could come down quicker than the bank now guides.
“We have not yet won the fight against inflation,” said Nagel, who visited Cyprus last week. He described inflation as a ‘stubborn, greedy beast’ and said the next phase of wrestling it down would be more difficult.
“Add in a scenario where an escalation of geopolitical tensions could imply higher inflation and it becomes clear that it would be way too early to declare victory over high inflation rates,” said Nagel, an influential voice on the ECB’s rate setting Governing Council.
“I can’t tell whether interest rates have already reached their peak. On the ECB Governing Council we decide on interest rates on a meeting by meeting basis following our data-dependent approach.”
Nagel added that the outlook for inflation was tempered by a weakening of dampening base effects and the phasing out of measures to cap high energy prices in many European countries. He also pointed to an expected continuation of strong wage growth.
“All in all, I expect inflation to carry on declining, but at a slower pace and with possible bumps along the way,” Nagel said.
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