Fallout from Greensill Collapse Splatters British Government, As Taxpayers Face Big Losses, by Nick Corbishley

If you’re worried that government-connected people will face civil or criminal liabilities, or at least some embarrassment, rest assured, this will all be swept under the rug and losses borne by the taxpayers. From Nick Corbishley at nakedcapitalism.com:

Downing Street’s dodgy dealings with Citigroup and Greensill show just how far the British government is willing to go to line the pockets of banks and other financial firms while bleeding taxpayers dry. 

The collapse of UK-based supply chain finance firm Greensill Capital continues to reverberate. In Germany the private banking association has paid out around €2.7 billion to more than 20,500 Greensill Bank customers as part of its deposit guarantee scheme after the bank collapsed in early March. But the deposits of institutional investors such as other financial institutions, investment firms, and local authorities are not covered. Fifty municipalities are believed to be nursing losses of at least €500 million.

Greensill’s biggest source of funds, Credit Suisse, has seen its share price plunge by almost a quarter. This is due not only to the fallout from Greensill’s collapse but also the impact of losses at its prime brokerage division caused by the stricken U.S. hedge fund Archegos, which are expected to reach €4 billion. The lender has warned of “considerable uncertainty” regarding the valuation of its supply chain finance fund. More than $5 billion of the roughly $10 billion invested in the fund remains outstanding.

Credit Suisse had assured clients in marketing documents that the debt in the supply chain fund was “low risk”. In one factsheet, it also said: “The underlying credit risk of the notes is fully insured by highly rated insurance companies.” At the beginning of March, that turned out not to be true. Some clients whose money remains trapped in the fund have threatened to sue.

Greensill’s biggest client, Anglo-Indian steel magnate Sanjeev Gupta, is on the verge of bankruptcy. Gupta’s GFG Alliance reportedly owes Greensill more than €3 billion. It began defaulting on its obligations after Greensill stopped lending to the group at the beginning of March. At the end of March Gupta requested a £170 million emergency loan from the UK government, which was duly rejected. Greensill’s administrator, Grant Thornton, has been unable to verify invoices underpinning some of the loans to Gupta. Companies listed on the documents denied ever having done business with the metals magnate.

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