UK investigating banks over secret loans – Joseph Hanlon

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UK investigating banks over secret loans – Joseph Hanlon

6:10 CAT | 07 Jun 2016

“UK regulators are making inquiries into Credit Suisse Group AG’s and Russian bank VTB Group’s handling of hundreds of millions of dollars of debt the banks arranged for the purchase of boats and military equipment for state-backed companies in Mozambique,” the Wall Street Journal (WSJ) reported Saturday (4June)

Both banks used their British operations to handle three secret loans, totalling $2 billion. The WSJ says the UK Financial Conduct Authority is looking into whether the banks violated regulations governing disclosures to investors around the bond restructuring. WSJ reports that investors said they had not been told of the two other $1.15 billion in loans at the time of the Ematurm $850 million bond restructuring. “Much of the money raised for the tuna fleet was subsequently diverted to the military,” WSJ notes.

At issue, according to the WSJ, is that the banks didn’t mention these extra “loans to bondholders during roadshows to explain the restructuring, [although] they had included the borrowings in the calculation of Mozambique’s consolidated public debt that they provided to investors.”

Campaigners are broadening the issue, however. IMF Managing Director Christine Lagarde said that in keeping loans secret, the Mozambique government is “clearly concealing corruption.” (Mozambique News reports & clippings 323) Campaigners argue that the loans are “illegitimate” because Credit Suisse and VTB should have known and told investors that: 1) the loan ostensibly for fishing boats was used for military purposes, 2) that it was highly likely that money was being diverted for corrupt purposes, and 3) that the loans could not be guaranteed by the government without approval of parliament.

By: Joseph Hanon

Source: News reports & clippings