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The Guardian - UK
The Guardian - UK
Rupert Neate

German regulator takes oversight of Greensill Capital as crisis deepens

BaFin office in Bonn, Germany
Germany’s financial watchdog BaFin took over direct oversight of operations at Greensill Bank, a German division of the provider. Photograph: Wolfgang Rattay/Reuters

The crisis engulfing Greensill Capital, a controversial bank that employs former UK prime minister David Cameron, mounted on Tuesday night when it emerged that Germany’s financial watchdog has taken direct oversight of operations at a local subsidiary of the London-based lender.

Greensill Capital is seeking insolvency protection in Australia and a rescue deal with new and existing backers, after two Swiss banks announced they were closing funds linked to the business over concerns about its true value.

Australian founder Lex Greensill, who with his brother Peter has made billions from the venture, is battling to ensure it survives the crisis. A spokesman said the bank had “entered a period of exclusivity with a leading global financial institution” over securing emergency funding.

The bank, which specialises in supply-chain finance where businesses borrow money to pay bills, was plunged into crisis on Monday when Credit Suisse suspended $10bn (£7.2bn) of funds linked to Greensill, warning that there were “considerable uncertainties” about the true value of the assets.

Swiss asset manager GAM Holdings on Tuesday said it was also closing its $842m GAM Greensill supply chain finance fund because of “market developments and resulting media coverage”.

Germany’s banking regulator BaFin has in recent weeks had a special representative working at Greensill Bank, a subsidiary lender based in the north-west town of Bremen. That person is reported to have taken day-to-day control of operations there, according to the Financial Times and Bloomberg. The regulator, which has been conducting an audit of the bank since autumn, declined to comment.

While Greensill is mostly based in London it is exploring “safe harbour” insolvency protection in Australia, according to the Financial Times. The company is registered in the Queensland city of Bundaberg, the home town of Lex Greensill.

A spokesman for Greensill declined to comment about the reported German intervention, the Australian insolvency proceedings or the withdrawn funding from Credit Suisse and GAM.

He said: “There has been an ongoing regulatory audit of the bank since autumn. This regulatory audit report has specifically not revealed any malfeasance at the bank. We have constructive ongoing dialog with all regulators in all jurisdictions where we operate.”

He confirmed Greensill had entered a “period of exclusivity with a leading global financial institution”, with a view to concluding a transaction this week.

“The transaction is expected to include large parts of Greensill’s business and its assets under management. While the structure of the new business is still being determined, we expect the transaction will ensure the majority of Greensill clients will continue to be funded in the same way as they currently are while also preserving a substantial number of jobs.”

The niche lender, which provides financing to help companies spread the cost of their supply bills, relies on investors such as those brought in by Credit Suisse, to buy its assets. The moves by GAM and Credit Suisse deprive it of sources of funding.

Greensill promotes an interview he gave to the Australian Financial Review in 2018 about his success.

“The business is extraordinarily capital efficient and we’ve invested fully ourselves in growing the business because we wanted to maintain control,” Greensill said in the interview, promoted on this bank’s website. “The firm is still substantially owned by myself and the staff and I’m very proud of that … Dozens and dozens of our employees have become millionaires on the back of this.”

Cameron, a senior adviser to Greensill, regularly promotes the bank overseas. In December 2019, Cameron said: “From its UK foundations, Greensill has taken on the world, upending traditional financing models and democratising capital to give businesses, including many SMEs and small traders, access to low-cost funding.”

Before he formed Greensill in 2011, Lex Greensill, 44, worked in supply chain financing at Morgan Stanley and Citibank. He was also a “crown representative” to the UK government on supply chain finance, and was awarded a CBE for services to the economy in the Queen’s 2017 birthday honours.

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