UK regulator opens probe into Greensill operations
CAMERON TO FACE MPs’ PANEL OVER ‘IMPROPER’ LOBBYING
BRITAIN’S Financial Conduct Authority (FCA) said on Tuesday (11) it was formally investigating the UK operations of collapsed supply chain finance company Greensill as part of global probes.
“We are also cooperating with counterparts in other UK enforcement and regulatory agencies, as well as authorities in a number of overseas jurisdictions,” FCA CEO Nikhil Rathi said in a letter to parliament’s Treasury Select Committee. Greensill Capital lent money to firms by buying their invoices at a discount, but it collapsed in March 2021 after insurers pulled their cover. Among the investors burnt in the widespread fallout included clients of Swiss banking giant Credit Suisse, steel magnate Sanjeev Gupta’s GFG Alliance and some 26 German towns.
MPs have opened an inquiry into lessons from Greensill’s implosion and later on Tuesday were scheduled to meet the company’s founder Lex Greensill in a public hearing. His appearance comes ahead of UK former prime minister David Cameron facing the same panel on Thursday (13) for questions focused on claims of improper government lobbying involving the London-headquartered company.
Lex Greensill, the 44-year-old son of sugar cane planters, obtained inside access to the Downing Street machine during Cameron’s spell as prime minister in the previous decade.
Rathi will appear before the committee on Wednesday (12), a day after Eastern Eye went to press.
The FCA is investigating matters relating to Greensill Capital UK, Greensill Capital Securities and the oversight of the latter by its principal, Mirabella Advisers LLP, Rathi said. “We are also cooperating with counterparts in other UK enforcement and regulatory agencies, as well as authorities in a number of overseas jurisdictions,” Rathi said.
The FCA said it was only responsible for supervising how Greensill Capital UK complied with anti-money laundering (AML) safeguards.
“The wider activities that GCUK undertook were not regulated by the FCA .... and the origination of a supplychain finance instrument is not a regulated activity,” Rathi said.
To help with the “smooth functioning” of the administration of Greensill, the FCA has decided that for now it
won’t cancel the firm’s registration for AML compliance. “We agree with the Bank of England’s assessment that the Greensill entities were not systemically important for the purposes of UK financial stability,” Rathi said. “GCUK was not regulated by the FCA to conduct regulated activities and, in line with the Bank’s assessment of Greensill, no specific analysis was done for reasons other than direct supervision.”
Headed by British Indian magnate Sanjeev Gupta, GFG runs Liberty Steel, which could be forced to shut some of its dozen UK plants following the collapse of its main financial backer, according to UK business secretary Kwasi Kwarteng. Greensill Capital’s implosion threatens about 50,000 jobs overall at companies around the world that relied on its financing for their supply chains.
Cameron advised Greensill Capital and sought government support for the stricken company last year via text to chancellor Rishi Sunak, bypassing official channels.
Cameron, who was prime minister from 2010 until he resigned after Britain voted to leave the European Union in 2016, has admitted he acted in error but denies any impropriety.
Speaking ahead of this week’s hearings, Treasury Committee chairman Mel Stride said the body was determined to discover whether the Treasury “responded appropriately” to all lobbying on Greensill Capital’s behalf.
Greensill Capital, which bypassed strict regulations forced upon traditional banks, specialised in short-term corporate loans via a complex and opaque business model that ultimately sparked its declaration of insolvency. It was creditors including Credit Suisse and the Association of German Banks who last month placed the Australian parent of Greensill Capital into liquidation.
Switzerland’s second-largest bank – rocked also by the bankruptcy of US hedge fund Archegos – has been forced to suspend four funds with an exposure to Greensill totalling $10 billion (£7bn).
In Japan, Softbank is counting the cost after investing $1.5bn in Greensill two years ago. And the Association of German Banks counts losses of €2bn (£1.7bn) after investing communities’ money with the Bremen-based subsidiary of Greensill.
Prime minister Boris Johnson ordered a senior lawyer to investigate Cameron’s lobbying for the firm in April.