Credit Suisse is banning its traders from dealing with a batch of Venezuelan bonds, fearing any potential reputational fallout from being seen to support the increasingly autocratic government of Nicolás Maduro

https://www.ft.com/content/ea76f1aa-7e0e-11e7-ab01-a13271d1ee9c

3 HOURS AGO by: Robin Wigglesworth and Eric Platt in New York Credit Suisse is banning its traders from dealing with a batch of Venezuelan bonds, fearing any potential reputational fallout from being seen to support the increasingly autocratic government of Nicolás Maduro. Goldman Sachs was earlier this year lambasted by the country’s opposition for its asset management arm’s purchase of $2.8bn worth of Venezuelan bonds issued by the state oil company, PDVSA, which opposition members said amounted to a financial lifeline for the authorities. Nomura also reportedly bought a smaller chunk of Venezuelan bonds at about the same time as Goldman. But Wall Street is increasingly concerned about the reputational risks posed by the degenerating situation in the oil-rich but stricken Latin American country, where the government has forcefully cracked down on the opposition amid a mounting humanitarian crisis. The US imposed sanctions on more than a dozen Venezuelan officials and President Donald Trump has branded Mr Maduro a “dictator”, but the government has continued to tighten its grip on the country. Credit Suisse this week circulated a memo that would ban trading in two Venezuelan bonds including one sovereign issue due in 2036 and PDVSA’s bond maturing in 2022 — the one Goldman Sachs Asset Management snapped up. The company said it would also prohibit trading in any bonds issued after June 1 from any Venezuelan entity. RECOMMENDED Venezuela’s neighbours try to put financial pressure on Maduro Maduro bonds Maduro deepens Venezuela’s isolation with new assembly “In light of the political climate and recent events in Venezuela, and actions taken by the current government, we want to ensure that Credit Suisse does not provide the means for anyone to violate the human rights of the Venezuelan people,” the bank said. The memo was first reported by Bloomberg, and a spokesperson for the bank confirmed its veracity. Trading in other Venezuelan bonds would go through a reputational risk office, the spokesperson said. The bank’s reputational risk office must also approve of any new business with Venezuelan counterparts. The Swiss bank said that it “does not want to be involved in any transaction or action which could be perceived as enabling the current Venezuelan regime to continue to violate the Venezuelan people’s human rights”. The decision to ban trading in some Venezuelan bonds follows Credit Suisse’s role last year in advising PDVSA in a debt swap with creditors. The deal won the cash-strapped oil group a much needed lifeline as it stared down default. Venezuela’s political crisis has deepened over the summer due to the government’s introduction of a new constituent assembly that will rewrite the country’s constitution, and the jailing of opposition politicians Leopoldo López and Antonio Ledezma. The US government last week released a statement from Mr Trump condemning the actions of the Maduro “dictatorship”. “The United States holds Maduro . . . personally responsible for the health and safety of Mr López, Mr Ledezma, and any others seized. We reiterate our call for the immediate and unconditional release of all political prisoners.” Venezuela’s bonds have emerged as a flashpoint in the country’s crisis, with the opposition arguing that they constitute “hunger bonds” that help support the autocratic government. While Goldman Sachs Asset Management bought the bonds via a little-known brokerage called Dinosaur Group, the seller was the Venezuelan central bank, which the authorities have enlisted to help support the country’s tattered finances. In an open letter to Lloyd Blankfein, Goldman’s chief executive, Julio Borges, head of Venezuela’s opposition-controlled National Assembly, earlier this summer accused the bank of trying to make “a quick buck off the suffering of the Venezuelan people”, and promised to default on the debts should he win power. Copyright The Financial Times Limited 2017.