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July 25, 2022

Credit Suisse to pay $22.6m restitution in Mozambique loan scandal

Credit Suisse has agreed to pay $22.6m in restitution to investors who were defrauded in connection with a loan scandal in Mozambique, reported Financial Times.

The Swiss bank, which has been reeling from costly scandals and litigations in recent years, agreed to pay the amount to investors who purchased debt to help fund a tuna fishing project in the South African country.

Credit Suisse and Russian investment bank VTB arranged $2bn of government-backed loans and bonds between 2013 and 2016 to supposedly develop a state tuna fishing fleet and maritime security projects.

Companies took the loans to purchase equipment using state guarantees that were not approved by Mozambique’s parliament.

The size of the debt was not disclosed to international donors and the IMF until 2016. The revelations of the loans, the collapse of the companies, and subsequent defaults led to years of financial crisis in Mozambique.

According to the estimation of Mozambique’s Centre for Public Integrity, the fallout cost the country’s economy $11bn and forced 1.9 million more people into poverty.

In October last year, Credit Suisse agreed to pay $475m in a penalty to US, UK and Swiss regulators and absolved $200m of debt to Mozambique.

In the US, the Swiss bank signed a deferred prosecution agreement while its European subsidiary pleaded guilty to committing wire fraud.

Weighs additional cost cuts

Credit Suisse is said to be considering additional cost cuts following a weak performance in the last quarter.

The bank is now looking for ways to further strike down its costs and is in the process of putting together a new, large cost-saving plan, SonntagsZeitung reported.

A source familiar with the development told the Swiss NewsPaper that “the cost structure is too large for the bank’s revenue potential”.

The Zurich-headquartered bank flagged a possible second-quarter loss last month.

According to the report, discussions on the cuts are at an advanced stage. But it is not known whether they will be announced by the bank when it reports second-quarter earnings this week.

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