Credit Suisse and Mozambique have reached an out-of-court settlement over the “hidden debt” scandal, with both sides mutually releasing each other from any liability, UBS, which bought out its Swiss rival, said on Sunday.

The announcement came ahead of the start of a civil trial that was due to begin in London’s High Court on Monday.

The scandal plunged Mozambique, one of Africa’s poorest countries, into a deep crisis.

The agreement states that Mozambique and Credit Suisse “have settled amicably the legal proceedings in London.”

“The parties have mutually released each other from any liabilities and claims relating to the transactions” and “are pleased to have resolved this long-running dispute,” it said.

On Friday, the Financial Times had reported that banking giant UBS wanted to make a “last-minute” out-of-court agreement with Mozambique ahead of the trial in London to avert a legal battle.

UBS was forced to take over its former subsidiary in March under pressure from the Swiss authorities to prevent Credit Suisse from going bust.

It is now unravelling the many issues that rocked the bank.

The agreement reached between Credit Suisse and Mozambique “is an important milestone in this legacy Credit Suisse issue and demonstrates that UBS is working through Credit Suisse’s litigation matters at pace and addressing them,” UBS said.

In October 2021, Credit Suisse was fined US$475 million following an agreement with United States, British and Swiss authorities to end proceedings over loans in Mozambique, at the heart of a vast corruption scandal.

In 2013, the bank had granted loans to state-owned companies intended to finance maritime surveillance, tuna fishing and shipyard projects, but some of the cash was misappropriated for bribes.

The government hid the debt from parliament, with loans from several banks, including Credit Suisse, estimated at around US$2 billion.

When the scandal broke in 2016, the IMF and World Bank suspended their financial support to Mozambique and the country defaulted on its sovereign debt.

Its currency collapsed. At the time of the agreement in October 2021, Credit Suisse had agreed with the British authorities to cancel US$200 million owed by Mozambique.

However, the country took legal action against the shipbuilding company Privinvest and Credit Suisse. (AFP)