German watchdog puts Greensill Bank on hold due to risk concerns (updated)

GFG Resources

03/03/2021 15:28

(Updates with Greensill response, PRA action on Wyelands Bank,
changes media identifier)
    By Tom Sims and Tom Bergin
    FRANKFURT/LONDON, March 3 (Reuters) - Germany's financial
watchdog warned of "an imminent risk" that Greensill Bank would
become over-indebted on Wednesday as it imposed a moratorium on
the lender making disposals or payments.
    BaFin's move is another blow to the bank's owner, Greensill
Capital, which said on Tuesday it is in talks to sell large
parts of its business after the loss of backing from two Swiss
asset managers which underpinned key parts of its supply chain
financing model.
    Greensill, which was founded in 2011 by former Citigroup
banker Lex Greensill, helps companies spread out the time they
have to pay their bills. The loans, which typically have
maturities of up to 90 days, are securitized and sold to
investors, allowing Greensill to make new loans.  
    Greensill's primary source of funding came to an abrupt halt
this week when Credit Suisse  CSGN.S  and asset manager GAM
Holdings AG suspended redemptions from funds which held most of
their around $10 billion in assets in Greensill notes, over
concerns about being able to accurately value them.  urn:newsml:reuters.com:*:nL5N2KZ3WE
    Two sources told Reuters on Wednesday that SoftBank-backed
Greensill Capital is preparing to file for insolvency, adding
that the sale talks were with U.S. private equity firm Apollo.
    Greensill and Apollo did not immediately respond to requests
for comment on Greensill's insolvency preparations, which were
earlier reported by the Financial Times, or on the sale talks.
    Japan's SoftBank, which has invested $1.5 billion in recent
years in Greensill, also declined to comment.
    BaFin said an audit found that Greensill Bank could not
provide evidence of receivables on its balance sheet purchased
from mining tycoon Sanjeev Gupta's GFG Alliance. GFG did not
respond to a Reuters request for comment on BaFin's findings.
    "The moratorium had to be ordered to secure the assets in an
orderly procedure," BaFin said in a statement, adding that the
Bremen-based bank would be closed for business with customers.
It declined to elaborate.
    Greensill Capital said in a statement that Greensill Bank
always "seeks external legal and audit advice before booking any
new asset."
    
    CASH RETURN
    Greensill Bank had loans outstanding of 2.8 billion euros
and deposits of 3.3 billion euros at the end of 2019, rating
agency Scope said in an October report, which did not detail the
bank's exposure to GFG.
    The bank is a member of the Compensation Scheme of German
Banks which means deposits up to 100,000 euros ($120,740) are
protected. The German regulator said withdrawals were not
currently possible, but gave no further detail in a statement.
    Prosecutors in Bremen said earlier they had received a
criminal complaint from BaFin regarding Greensill Bank, but did
not provide further details on it.  urn:newsml:reuters.com:*:nL5N2L15QD
    In Britain, meanwhile the financial regulator took action
against GFG's own trade finance arm Wyelands Bank. The Bank of
England's Prudential Regulation Authority said it had ordered
Wyelands to repay all its depositors. It said in a statement
that it had been engaging closely with Wyelands, but did not say
why it had taken the action.
    GFG said Wyelands, which had over 700 million pounds ($979
million) of deposits according to its latest annual report,
would repay deposits and planned to "focus solely on business
advisory and connected finance".
    A GFG spokesman declined to comment on the BoE statement.
    Credit Suisse said on Wednesday it is looking to return cash
from its suspended funds dedicated to supply chain finance,
which is a method by which companies can get cash from banks and
funds such as Greensill Capital to pay their suppliers without
having to dip into their working capital.
    "Given the significant amount of cash (and cash equivalents)
in the funds, we are exploring mechanisms for distributing
excess cash to investors," Credit Suisse said in a note to
investors on its website.
    Credit Suisse said that more than 1,000 institutional or
professional investors were invested across its funds.
($1 = 0.8282 euros)
($1 = 0.7153 pounds)

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EXPLAINER-Supply chain finance: Greensill's business model   
 urn:newsml:reuters.com:*:nL5N2L137N
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 (Reporting by Tom Sims and Patricia Uhlig in FRANKFURT and Tom
Bergin in LONDON; 
Additional reporting by Brenna Hughes Neghaiwi and Oliver Hirt
in ZURICH;
Editing by Alexander Smith)
 ((Tom.Sims@thomsonreuters.com; +49 30 220 133 645;))