The boss of collapsed finance company Greensill boasted to staff about the firm’s ‘enormous liquidity’ just three weeks before it collapsed and became embroiled in a political scandal.
Australian financier Lex Greensill, 44, reassured staff in an internal video on February 15 – audio of which has been obtained by the FT – of the ‘incredible strength’ of a key set of funds it held with Zurich-based Credit Suisse.
Just two weeks’ later the Swiss bank froze these funds, precipitating Greensill’s collapse around seven days later – leading to unwelcome headlines for former Prime Minister David Cameron, an adviser to the firm, who was today facing fresh questions over his closeness to Mr Greensill.
Australian financier Lex Greensill, 44, (seen walking his dog in Cheshire on April 5) reassured staff in an internal video on February 15 of the ‘incredible strength’ of a key set of funds it held with Zurich-based Credit Suisse
Greensill’s main business consisted of ‘supply chain financing’, which is the providing of loans to companies to allow them to pay their suppliers promptly.
The company bundled these loans into bond-like investments which were then packaged into funds and sold to the likes of Credit Suisse.
Greensill took out insurance to avoid the risk of the suppliers who had taken out the loans being unable to repay them.
He reassured employees that bosses were finalising a new insurance policy for the funds and those held by the Zurich-based asset manager GAM.
He said: ‘We’ve got enormous amounts of liquidity that are available to us, for our assets in the funds,’ he said. ‘The markets are very much behind us.’
What is supply chain financing?
Supply chain financing – also known as reverse factoring – is where a company brings in a middleman to pay a supplier on its behalf.
In many cases, this is done through so-called ‘early payment’ schemes – where suppliers are offered the chance to be paid early, but at a discount, by the lender.
The company that bought goods from the supplier then settles the debt with the lender later on. The lender makes money by taking a share of the discount taken off a supplier’s payment.
Supporters say the ‘win-win’ arrangement allows suppliers to get paid promptly, while big businesses can smooth out their flow of outgoings.
However, his words were contradicted a fortnight later when Credit Suisse froze its $10billion (£7.2bn) range of funds after the insurance on them expired, leading to Greensill’s collapse.
Greensill’s failure is set to produce £2.53bn ($3.5bn) of losses for Credit Suisse, according to analysts at JP Morgan.
The banking giant was also caught up in the collapse of Archegos, a hedge fund run by the billionaire Bill Hwang, leading to another bill estimated to be £3.4bn ($4bn).
As a result the bank’s senior executives have had their bonuses for the year withdrawn, while outgoing chairman Urs Rohner waived his £1.1m fee.
Chief risk and compliance officer Lara Warner and investment bank head Brian Chin have both been axed.
They were key allies of chief executive Thomas Gottstein, who took over from Tidjane Thiam in February last year but could find himself in the firing line when outgoing Lloyds boss Antonio Horta-Osorio takes over as Credit Suisse chairman next month with a major clean-up job on his hands.
Gottstein said: ‘The significant loss relating to the failure of a US based hedge fund is unacceptable.’
He added: ‘In combination with the recent issues around the supply chain finance funds, I recognise that these cases have caused significant concern amongst all our stakeholders.’
The departures of Warner and Chin are a serious embarrassment for the bank and Gottstein as the board continues to investigate what went wrong.
Pressure was growing on Boris Johnson to introduce a lobbying law last night as David Cameron faced more questions about his closeness to a controversial financier (File image)
Many have pointed the finger at Warner who was responsible for analysing the risk of both Archegos and Greensill and who was personally involved in signing off on a loan to Lex Greensill in October.
Who is Lara Warner? High-flying Australian-American once touted as the next CEO
Warner has been Chief Risk Officer at Credit Suisse since 2019, before last year being promoted to Chief Risk and Compliance Officer in a reshuffle of the board.
Given her role involves identifying and managing risks to the bank’s profitability, she will be seen to bear some responsibility for failing to spot issues with Archegos and Greensill before they collapsed, costing her company millions.
In 2017, she was among three senior executives to receive a total pay package of £54m.
The 52-year-old, who holds a Bachelor of Science degree from Pennsylvania State University, served as an equity research analysis at Lehman Brothers before moving to Credit Suisse in 2002.
The move meant she missed Lehman’s being declared bankrupt in 2008, which is considered one of the key moments of the Great Recession.
In 2019, she was touted by Financial News as a possible successor to CEO Tidjane Thiam. The profile praised her role in imposing capital controls on Credit Suisse’s trading division and becoming the first woman to join the group executive board.
The Australian-American was the first woman to join the group executive board, and has helped to scrutinise the bank’s conduct and culture, leading a review of a historical sexual assault case.
Her demise will have sent ripples through compliance departments at banks across the globe.
Warner was highly thought of at Credit Suisse, having worked her way up from analyst when she joined from Lehman Brothers in 2002.
The dual Australian and US national was a close confidante of former boss Thiam and under him she moved from New York to Zurich for the top compliance job in 2015.
She was promoted again by Gottstein last summer when the risk and compliance departments were combined.
Likewise Chin also benefitted from Gottstein’s reshuffle and was promoted from head of global markets to lead the investment bank.
Question marks have now been raised over Gottstein himself and his judge of character after he promoted them both.
There are suggestions that Horta-Osorio may look elsewhere for a lieutenant to clean up the bank.
One bank analyst said: ‘I wouldn’t be surprised, Antonio has a reputation and will want to make an impact straight away. This is a big blow up that has cost the bank billions.’ The analyst added that Horta-Osorio has a mammoth job if he is to turn around a bank that has been in disarray for some years.
Thiam was ousted in the wake of a saga involving corporate espionage that sent shockwaves through Switzerland’s famously discreet banking community.
He resigned after losing a boardroom battle that erupted when the bank admitted to having hired private detectives to spy on former staff.
It came as ex-PM David Cameron faced more questions about his closeness to Mr Greensill as leaked emails revealed how the Australian was able to push through a government loan scheme from which he benefited by citing the authority of then PM.
The cache of messages showed how the businessman told officials in 2012 that ‘the PM’ had requested that he implement his ideas ‘across government’.
He was said to have sent his proposed loan plan for NHS pharmacies to senior officials, who opposed them, but he was so confident he told them: ‘We are not seeking your approval.’
Lara Warner, (left) chief risk and compliance officer, is one of the senior executives to be axed from Credit Suisse after the bank reported bumper losses from two corporate collapses. Brian Chin,(right) CEO of its investment bank, is also stepping down
Brian Chin: ‘Nice guy’ American executive who oversaw Credit Suisse’s investment bank
Chin, 42, had only been CEO of Credit Suisse’s investment bank since August last year before being axed over its recent losses.
He joined the firm in 2003 from Deloitte, where he was a senior analyst, on the Securitisation Transaction Team.
Prior to that he worked at PricewaterhouseCoopers and the US Attorney’s Office after graduating from Rutgers University with a degree in Accounting.
In 2017, senior Credit Suisse insiders told eFinancialNews that Chin was a ‘really great guy’.
Another said: ‘He’s very personable and charismatic and is the kind of leader people would follow over hot coals. His style is all about trust and loyalty and camaraderie and people really respond to that.’
Recent filings show he had been awarded tens of millions of dollars worth of share options as part of his annual pay package.
The latest disclosures add to the pressure on Mr Cameron who brought Mr Greensill into No 10 as an unpaid finance adviser.
After leaving office the former PM then went to work as an adviser for Mr Greensill’s firm, Greensill Capital, in 2018 and later lobbied ministers on its behalf for support through the Government’s corporate Covid finance scheme.
He went straight to Chancellor Rishi Sunak and a Treasury minister, both of whom are said to have rebuffed the efforts.
Greensill Captial subsequently filed for insolvency after its application was rejected. Its collapse put the future of 5,000 jobs at risk while tens of millions of pounds of share options which Mr Cameron was reported to have received became worthless.
Last night Labour demanded the Government introduce a law to tackle cronyism in the wake of the lobbying scandal.
According to the latest disclosures, civil servants were worried by Mr Greensill’s proposals for a system of supply-chain finance – fast-tracking funds to a company’s suppliers for a commission, giving the company extra time to generate the money it needs to pay its own bills.
There were reportedly even suggestions the scheme could leave the government open to ‘legal challenge’.
One official described Mr Greensill as a ‘semi-private sector agent’, adding: ‘Rein him in – stop him approaching departments unilaterally.’
The Sunday Times reported that a deal was reached with Mr Greensill’s former employer Citigroup to run the scheme for pharmacies without a tender.
The financier was said to have shocked officials by writing that there was ‘no formal contract with Citigroup’, adding ‘this situation is entirely normal in the private sector’.
Credit Suisse said it was set to lose an astonishing £3.4bn from the collapse of Archegos, a hedge fund run by the billionaire Bill Hwang. Pictured is its London HQ
Labour’s Cabinet office spokesman Rachel Reeves called for legislation to expand the statutory register of lobbyists.
Mr Cameron did not have to declare his Greensill role on the register as the rules apply only to third-party lobbyists and not those employed directly by firms. Miss Reeves said: ‘Given the cronyism consuming the Conservative Party, it’s crucial that the scope of the lobbying register is expanded to include in-house lobbyists.
‘The former Conservative prime minister’s conduct and the immense access Greensill was given illustrates perfectly both the toothlessness of current rules, and Tory ministers’ complete disregard for any self-driven integrity when lobbying.’ Neither Mr Cameron nor Mr Greensill has commented over any of the claims.
The former PM has already been cleared by a watchdog looking at whether he engaged in lobbying for which he should have been registered. A Government spokesman said: ‘Lex Greensill acted as a supply-chain finance adviser from 2012 to 2015 and as a crown representative for three years from 2013.
‘His appointment was approved in the normal manner including registering any potential conflicts of interest.’
Plans to stop steel tycoon buying own plants on the cheap
Liberty Steel boss Sanjeev Gupta will be prevented from buying back his plants at bargain prices if they go bust, under plans being drawn up by the Government.
The metals magnate’s empire has been left on the brink of collapse after its largest lender Greensill Capital, which David Cameron worked for, imploded.
He is scrambling to raise cash after ministers rejected a £170million bailout of Liberty’s parent company GFG Alliance last month.
Whitehall officials are reportedly now concerned Mr Gupta might declare his steel business insolvent and later try to repurchase it.
This is a process known as ‘phoenixing’ – which company directors are strongly advised against doing. GFG employs 5,000 people in the UK, of which 3,000 are steelworkers spread across 12 sites.
Boris Johnson has said he is ‘very hopeful’ that the Government can save Liberty and all options – including nationalisation – are on the table.
To block Mr Gupta from potentially buying back parts of Liberty, officials are considering appointing accounting firm Deloitte to handle a possible insolvency that would carve it out from the rest of the company, according to The Sunday Times.
A GFG spokesman said: ‘Liberty Steel UK is undertaking significant self-help measures… working with our customers to achieve terms that will bring in cash earlier.’