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Credit Suisse seriously breached its supervisory obligations in its dealings with the financier Lex Greensill, whose $10 billion of funds distributed by the Swiss bank were frozen in 2021, the Swiss regulator said Tuesday after a two-year investigation.
Greensill offered what are called supply-chain funds via Credit Suisse
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The financing is meant to be low risk, where a financing company immediately pays out a seller’s claim, at a discount, and then collects on the claim from the buyer. Greensill, who was advised by former British Prime Minister David Cameron, securitized these claims and passed them onto four Credit Suisse funds.
Greensill, who was backed by the Japanese investment giant Softbank
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had some blue-chip counterparties such as Ford and AstraZeneca, but also riskier clients, such as the steel magnate Sanjeev Gupta, a former Greensill Capital shareholder.
The Swiss Financial Market Supervisory Authority, or Finmma, found that Credit Suisse had little knowledge or control over the claims and that Greensill picked them for the funds. Credit Suisse also left it to Greensill to insure the claims in its own name, and over time, allowed Greensill to transfer future claims to the funds that had not yet arisen.
The Swiss regulator also noted Credit Suisse’s inaction after it was approached both by the media and the regulator in 2018, when a different fund provider’s Greensill fund was shut. Further, Greensill was granted a bridging loan against the objections of a risk manager, and relied on Greensill’s answers for its own statements to the regulator, and “for these reasons, the bank made partly false and overly positive statements” about claims selection and the exposure to certain debtors.
Credit Suisse now is being ordered to prospectively assess its 500 most significant business relationships, and the areas of responsibility of the bank’s 600 highest managers must be recorded. The regulator also opened four enforcement proceedings against former Credit Suisse managers it didn’t name. Finma does not have the authority to issue fines.
Credit Suisse said it welcomed the conclusion of the investigation and noted that no profits were ordered to be confiscated, and that the implementation of additional measures is not expected to result in significant costs. The bank said it dismissed several managers and employees and recovered previously granted compensation awards.
Credit Suisse said it so far has recovered $7.4 billion of the $10 billion in the Greensill funds, and two of the funds have been completely liquidated. It said it will assess whether to make a further payout on the other two funds in the first half of this year.
Credit Suisse shares
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edged lower in Zurich trade on Tuesday. The stock has jumped 11% over the last week but is down 62% from its March 2022 highs.
Wealthy clients pulled over $100 billion out of Credit Suisse in the fourth quarter, as it lost money for the fifth straight quarter, dealing with the ramifications both of Greensill and the heavy losses it incurred lending to the Archegos family office.
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