UBS could be subject to 10-year ban from Papua New Guinea over oil loan

UBS could be subject to 10-year ban from Papua New Guinea over oil loan

Papua New Guinea’s former prime minister decried a probe into a UBS loan that called for the bank to be banned for 10 years from government contracts as a politically motivated “witch hunt”.

An independent commission of inquiry into a UBS loan to the PNG state in 2014 recommended that former prime minister Peter O’Neill, who secured the loan for the state, should be prosecuted “for giving false evidence to the commission”.

O’Neill said in a statement he believed the commission had found “no evidence of wrongdoing or corruption” on his part.

In 2014, the Swiss bank provided a “collar” loan of A$1.24bn ($920mn) to the PNG government to fund the purchase of a 10 per cent stake in Sydney-listed oil and gas company Oil Search. The complicated loan structure provided protection against market losses but put a limit on PNG’s upside returns.

Despite the downside protection, the loan proved costly to the PNG government, which sold its stake at a A$340mn loss after the oil price collapse of 2015. The commission said UBS profited from the “complex and opaque” structure of the loan, charging an upfront interest rate that independent consultancy Brattle Group found was unfair value.

In its final report, tabled in the