Germany’s financial watchdog BaFin has taken direct oversight of day-to-day operations at Greensill Bank, the Bremen-based lender that is part of the ailing London-headquartered finance group.
The move comes as parent group Greensill Capital — which is advised by former prime minister David Cameron and backed by SoftBank — seeks a rescue deal. The company is in talks with Apollo about a sale of certain assets and operations; meanwhile, it has sought protection from Australia’s insolvency regime.
Greensill was delivered a severe blow on Monday when Credit Suisse suspended $10bn of funds linked to the supply-chain finance firm, citing “considerable uncertainties” about the valuation of the funds’ assets. A second Swiss fund manager, GAM, also severed ties on Tuesday.
In Germany, where Greensill has owned a bank since 2014, BaFin appointed a special representative to oversee its day-to-day activities in recent weeks, according to three people familiar with the matter.
The regulator has been conducting a special audit of Greensill Bank for the past six months and may soon impose a moratorium on the bank’s operations, these people said.
There is growing concern among regulators and the private banking sector’s deposit insurance scheme about the quality of some of the receivables that the lender is holding on its balance sheet, two people said. Regulators are currently also scrutinising the insurance that the lender has said is in place for its receivables.
Greensill Bank has provided much of the funding to GFG Alliance, a sprawling empire controlled by industrialist Sanjeev Gupta.
“There has been an ongoing regulatory audit of the bank since autumn,” said a spokesman for Greensill. “This regulatory audit report has specifically not revealed any malfeasance at the bank. We have constructive ongoing dialogue with all regulators in all jurisdictions where we operate.”
The spokesman added that all of the banks assets are “unequivocally” covered by insurance.
Meanwhile, Greensill Capital has sought protection from Australia’s insolvency regime, as the finance group races to strike a rescue deal and as another fund severed ties.
The company is hoping to invoke “safe harbour” protection in Australia, which can shield directors from personal liability, according to people familiar with the matter.
While the bulk of Greensill’s business is based in London, its parent company is registered in the Australian city of Bundaberg, the hometown of its founder Lex Greensill.
Greensill is in talks with Apollo Global Management, the $455bn private equity and distressed-investment firm, to rescue parts of the business and keep its funding lines open for blue-chip clients.
Greensill, a 44-year-old former investment banker, has said that the idea for his company was shaped by his experiences growing up on a watermelon farm in Bundaberg, where his family endured financial hardships when large corporations delayed payments.
Greensill Capital’s main financial product — supply-chain finance — is controversial, however, as critics have said it can be used to disguise mounting corporate borrowings.
Even if an agreement is struck with Apollo, it could still effectively wipe out shareholders such as SoftBank’s Vision Fund, which poured $1.5bn into the firm in 2019. SoftBank’s $100bn technology fund has already substantially written down the value of its stake.
Gupta, a British industrialist who is one of Greensill’s main clients, separately saw a bid to borrow hundreds of millions of dollars from Canadian asset manager Brookfield collapse.
Executives at Credit Suisse are particularly nervous about the supply-chain finance funds’ exposure to Gupta’s opaque web of ageing industrial assets, according to people familiar with the matter.
The FT reported earlier on Tuesday that Credit Suisse has larger and broader exposure to Greensill Capital than previously known, with a $160m loan, according to two people familiar with the matter.
Additional reporting by Laurence Fletcher and Stephen Morris in London