Greensill collapse could lead to regulatory probe
THE collapse of Greensill, whose founder, Lex Greensill, received a state honour from Britain in 2018 for his services to the economy, could lead to a series of regulatory investigations and cause financing problems for its higher-risk borrowers.
Credit Suisse told investors most of the money in its supply chain finance funds was insured, but the bank has declined to confirm the current insurance status of the funds.
Greensill said it had provided more than $143 billion (£103bn) of financing in 2019 to 10 million customers and suppliers. In Germany, where Greensill runs a bank, financial regulator BaFin has filed a criminal complaint with prosecutors in Bremen, where the lender is based. The precise details of the complaint are not known.
BaFin also suspended Greensill Bank’s operations
saying there was an imminent risk it could become bankrupt. The German bank kept Greensill Capital’s short-term loans on its balance sheet before they were securitised and sold to Credit Suisse.
Several German municipalities have flagged that they have put millions of euros into Greensill Bank, attracted
by its lack of negative interest rates, and some are calling on the federal government to cover any losses.
BaFin said an audit found that Greensill Bank could not provide evidence of receivables on its balance sheet purchased from GFG Alliance. GFG has not responded to requests for comment on the findings.
The Bank of England’s Prudential Regulation Authority has taken action against GFG’s own trade finance arm, Wyelands Bank, ordering it to repay all its depositors, without specifying why.
GFG declined to comment on the reasons.
PAKISTAN’S cabinet on Tuesday (9) approved amendments to a law allowing the central bank to operate independently of government, an official said.
The decision follows an announcement by the International Monetary Fund last month that it will resume a $6 billion (£4.32bn) rescue package that had been suspended for over one year. “The law is to seek more autonomy for the state bank,” finance adviser Abdul Hafeez Shaikh said in a video statement issued by the finance ministry.
“They will take decisions on their monetary policy and exchange rate in an independent environment without intervention from the government,” he said of the country’s central bank, whose policies have always been subject to government influence.
The proposed draft, which needs parliamentary approval to become law, also gives a five-year tenure to the central bank governor to ensure a continuation of policies.
The law will abolish the monetary and fiscal policy coordination board of the central bank, and the bank will be made “accountable” to parliament, Shaikh said.
The IMF and Pakistan reached a staff-level agreement in February to release around $500 million (£360m) as part of the $6 bn rescue package approved in 2019.
An IMF board approval is still pending to release the money. Pakistan has also received $1.4bn (£1bn) from the IMF’s Rapid Financing Instrument in separate, emergency funding to help it fill a funding gap stemming from the coronavirus pandemic.
IMF has projected economic growth of 1.5 per cent for Pakistan in fiscal 2020-21.