He said he first became concerned about the financial health of his company in December when a German regulator said a bank acquired by Greensill Capital must cut its exposure to a client.
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May 11, 2021 at 1:13 p.m. ET
The request “would be impossible for us to fulfill,” said Greensill.
Greensill’s business model has raised concerns and even allegations of fraud. The main offering has been supply chain finance, where a middleman advances payments to suppliers and the money is then returned by the buyer. It’s a long-established type of funding usually provided by banks, but Greensill added a twist. The suppliers’ invoices and other receivables were packaged in assets that were then sold to investors through funds. The company also financed companies on “future claims” based on transactions that had not yet taken place.
In the virtual hearing on Tuesday, Mr. Greensill vigorously defended the business model.
“Every asset we’ve ever sold has been properly described,” he said, adding that all investors would have had complete information about what they were buying.
But he admitted a little admission for mistakes he’d made. He told lawmakers that one of his company’s innovations is taking information directly from company accounts to make quick credit decisions. This “is absolutely the future, but the way I did it definitely had flaws,” he said without specifying what they were.
In March, when insurance coverage ran out, Credit Suisse closed Greensill’s $ 10 billion supply chain finance fund. The Swiss bank returned almost half of the amount to investors, but is still exposed to potential billions in losses.
“I am fully responsible for the collapse of Greensill Capital,” said Greensill, adding that he was “desperately sad” that more than 1,000 of its employees had lost their jobs. But he added, “It is deeply regrettable that we have been disappointed with our leading insurer, whose actions ensured the collapse of Greensill.”
The Financial Conduct Authority, the UK’s top financial regulator, said in a letter to the committee that it is “formally investigating” Greensill because some of the allegations of its failure are “potentially criminal in nature”. The agency also works with supervisory authorities in Germany, Australia and Switzerland, wrote Nikhil Rathi, the supervisory authority’s managing director.