Credit Suisse shamed over Greensill crisis
TROuBLeD Credit Suisse has been publicly shamed by financial regulators for the third time in two years – this time over its relationship with a collapsed supply chain finance firm.
Greensill’s demise in March 2021 prompted the Swiss bank to abruptly close funds in which its clients had invested more than £8bn.
Finma, Switzerland’s financial regulator, concluded after a probe into the episode that the lender ‘seriously breached its supervisory obligations’.
It follows two previous reprimands in 2021 for Credit Suisse, one for a scandal in which it was caught spying on top executives and another over loans to Mozambique, linked to a corruption scandal, which eventually tipped the country into a financial crisis.
Greensill – which was founded by Australian Lex Greensill ( pictured) and counted former prime minister David Cameron as an adviser – made its money through a business model involving invoices issued by suppliers to companies buying their goods or services.
Greensill would step in and pay the bill immediately rather than leaving the supplier waiting, then claim the full purchase prices from the buyer, making a profit on the difference.
From 2017, some of these claims were packaged up as financial products and transferred to funds controlled by Credit Suisse. Finma’s investigation found that Credit Suisse ‘had little knowledge and control over the specific claims’ and that even though the Swiss bank was the manager of the funds, it left Greensill to select and review the claims that went into them.
Over time, the funds became riskier, coming to include expected future invoice claims that had not yet arisen, the watchdog found.
The concerns of one banker about granting a loan to Greensill were overruled.
Finma also said the bank had made ‘partly false and overly positive statements’ to it about the claims.
As a result of the probe, Credit Suisse has been ordered to periodically review about 500 of its most important business relationships.
Credit Suisse chief executive ulrich Koerner said the announcement ‘underlines the importance of the actions we have taken in recent years to strengthen our risk and compliance culture’.