Greensill The Debacle Hits Credit Suisse

Credit Suisse's Fatal Gamble: The Inside Story of the Greensill Collapse

Stark warnings about Greensill Capital emerged long before its eventual implosion sent shockwaves through the global financial system. The Swiss banking giant's partnership with the firm's founder, Australian financier Lex Greensill, would ultimately contribute to its own stunning downfall. A cascade of failures in risk management, governance, and judgment ignored clear red flags, leading to billions in losses and the demise of a 167-year-old institution. Now, a previously secret report and a high-stakes London court case are laying bare the full extent of the rot. The scandal stands as a brutal lesson in modern finance, involving high-profile names like David Cameron, a one-time prime minister of the UK, and exposing a culture of recklessness.

Early Alarms Sounded in 2018

Beginning in 2018, anonymous messages began arriving for top figures at Credit Suisse. These communications directly challenged the "character judgment" of the bank's senior management for its involvement with Lex Greensill and his company. The concerns centred on the bank's method of consolidating Greensill's corporate loans into multiple investment funds, which were then sold to its wealthiest clients. These funds would eventually swell to a value of $10 billion. The informant expressed "strong doubts" about the entire arrangement, questioning the wisdom of entrusting such a significant amount of client capital to Greensill's discretion. The warnings, however, were not heeded.

A Partner of Questionable Character

The anonymous tips highlighted deep-seated anxieties about the suitability of partnering with the Greensill Capital firm. One message articulated serious misgivings about providing Greensill with such a high degree of control over client money. A significant point of concern was that a large portion of the loans packaged into the funds were directed towards companies within the struggling steel conglomerate of magnate Sanjeev Gupta. This concentration of risk in a single, volatile sector should have been a major red flag for the bank’s risk managers. The warnings painted a picture of a partnership fraught with potential peril.

The GAM Precedent Ignored

Further amplifying the risk, a different collection of funds backed by Greensill, which the rival asset manager GAM provided, had recently collapsed. The anonymous tipster explicitly pointed to this event, stating it represented a clear red flag for the executives at the Swiss bank. It was a clear, real-world example of the dangers associated with Greensill's financial products. The message urged the bank's leadership to exercise caution, yet the advice went unheeded. The bank continued its relationship, seemingly undeterred by the failure at a rival firm that was engaged in a very similar enterprise. This dismissal of a direct precedent highlighted a profound failure in the bank's risk assessment culture.

A Culture of Dismissal

The internal response at the Swiss bank to these dire warnings revealed a culture of arrogance and dismissal. Instead of launching a serious internal review, a high-level executive astonishingly forwarded the anonymous 2018 tip-off directly to Lex Greensill. The manager added a personal note, stating that people within the bank were receiving anonymous emails. He then urged Greensill to seriously reconsider his public relations approach. This reaction demonstrated a focus on message control rather than on addressing the fundamental risks that the informant had raised. It suggested a management team more concerned with appearances than with protecting its clients' assets.

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The Architect: Lex Greensill

The central figure, Lex Greensill, had a background that was anything but typical for a City financier. Originally a melon farmer from Australia, he transitioned into the world of high finance and founded Greensill Capital in 2011. The firm specialised in supply-chain finance, a method where a finance company pays a business's invoices early for a charge. However, Greensill engaged in numerous intricate financial agreements and promoted his lending institution not as a traditional finance house, but as a dynamic technology firm. This branding helped attract significant attention and investment in the fintech-obsessed market.

High-Profile Connections and Lobbying

To bolster its image and influence, Greensill Capital enlisted a number of high-profile advisers, most notably David Cameron, who joined in 2018 after his tenure as prime minister of the UK. His role later became the subject of a major political scandal in the UK. During the Covid-19 pandemic, he lobbied senior government figures, including then-Chancellor Rishi Sunak, via text messages, attempting to secure Greensill's access to government-backed emergency loan schemes. Although his efforts were ultimately unsuccessful, the informal nature of his lobbying drew widespread criticism and triggered multiple inquiries into the relationship between business, former ministers, and the government.

The SoftBank Factor

Greensill's slick marketing and high-profile connections succeeded in attracting several large investors. Among the most significant were the American private equity firm General Atlantic as well as Japan's SoftBank, which invested through its massive Vision Fund. These injections of capital were purportedly intended to fund a global expansion of Greensill's activities. The backing of such prominent investors lent an air of legitimacy to Greensill and its complex business model, reassuring others in the market and helping to fuel its rapid growth. The investments were seen as a major vote of confidence in the company's future.

A Façade of Lavish Success

While investors believed their money was funding expansion, the reality, a report from Finma the Swiss regulator found, was quite different. The investigation, compiled after the collapse, determined that the large capital infusions were predominantly directed toward other purposes. A significant portion went to paying out earlier private investors. Another part was used to provide additional capital to Greensill Bank, the firm's German banking subsidiary, which was coming under increasing regulatory pressure. The investigation from Finma also detailed a culture of corporate excess. It noted that under Lex Greensill's management, the company supplied bespoke suits to staff, maintained sophisticated corporate offices, and operated its own private fleet of jets.

Unheeded Warnings into 2019

The 2018 alerts were not isolated incidents. The investigation from Finma showed that leadership at Credit Suisse kept getting notifications about its Greensill arrangements as recently as June 2019. Despite the mounting evidence of risk, the bank deepened its relationship with the finance firm. During this period, Greensill was still seen as a rising star in the financial world. It held ambitions for a massive public offering valued at £22 billion. The bank appeared to be blinded by the potential profits, choosing to ignore the persistent internal and external signs of trouble that were becoming increasingly difficult to miss.

The Unravelling of 2021

The entire house of cards came crashing down during March 2021. The immediate trigger for the collapse was the refusal of Greensill's insurers, including its main provider Tokio Marine, to renew the policies guaranteeing its loans. Without this insurance, the loans were suddenly exposed as far riskier than they had been marketed. This occurred amidst escalating concerns about Greensill's opaque governance and its significant financial ties to Sanjeev Gupta's struggling GFG Alliance metals empire. The firm's implosion was swift, sparking monetary and political firestorms that reverberated globally.

Ripple Effects Devastate Credit Suisse

Greensill's collapse had immediate and catastrophic consequences for its main banking partner. The event compelled Credit Suisse to freeze and liquidate the $10 billion worth of funds it had created using Greensill's loans. This move trapped the money of around 1,200 of the bank's wealthiest clients, who were left facing losses amounting to huge sums. The event severely eroded trust in the risk management at Credit Suisse and its stewardship of client assets. The scandal was a major blow to the bank's reputation and a significant contributor to the crisis of confidence that would ultimately seal its fate.

The Sanjeev Gupta Connection

At the heart of Greensill's failure was its outsized relationship with Sanjeev Gupta's GFG Alliance, a sprawling international metals conglomerate. Greensill was a primary lender to Gupta's businesses, providing billions in financing that fuelled GFG's rapid expansion. The collapse exposed the precarious nature of this lending. In the aftermath, the UK's Serious Fraud Office (SFO) launched a major criminal investigation into GFG Alliance for suspected fraud and money laundering in relation to its financing arrangements with the Greensill firm. This probe added another layer of scandal and legal jeopardy to the affair.

Finma's Damning Investigation

The implosion of the funds supported by Greensill forced Switzerland's financial regulator, the Swiss Financial Market Supervisory Authority (Finma), to act. It launched an extensive probe that lasted almost two years into the bank's activities with Lex Greensill and his firm. The probe sought to understand how the bank had allowed itself to become so exposed to a high-risk partner and why multiple internal warnings had been ignored. The investigation delved deep into the bank's internal controls, its risk management processes, and the decision-making of its most senior executives, ultimately producing a scathing report.

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A Verdict of Serious Breach

The key findings were released by Finma in February 2023. The regulator declared publicly that the Swiss bank gravely violated its duties of oversight in the Greensill affair. The report pointed to serious deficiencies in the bank's risk governance and its internal framework. Finma concluded that the bank had failed to adequately identify, limit, and monitor the risks associated with the funds. As a result, the regulator imposed corrective measures, including enhanced supervision for its top leadership, and initiated enforcement proceedings against several of the bank's former officials.

The Final Collapse and Rescue

Just one month after Finma's damning public verdict, Credit Suisse collapsed. While the Greensill scandal was not the sole cause, it was a major contributing factor alongside other crises like the implosion of the US hedge fund Archegos Capital. Multiple crises had shattered the confidence of clients and markets, leading to a massive bank run. With the bank on the brink of insolvency, its failure in March 2023 prompted Swiss authorities to orchestrate an emergency rescue. Its historic rival, UBS, was compelled to acquire Credit Suisse to prevent a wider financial meltdown.

Legal Battles in London

The fallout from the collapse continues to play out in the courts. A fund previously managed by Credit Suisse, now under the stewardship of UBS, is pursuing legal action against SoftBank, a Japanese investor, for $440 million in London's High Court. The lawsuit alleges that SoftBank coordinated a complicated transaction supposedly arranged with Greensill Capital for another of its struggling investments, the US construction firm Katerra, just before Greensill's collapse. The claimant argues this deal was designed to benefit SoftBank at the expense of the fund's investors, rendering notes they held worthless. SoftBank has denied the claims, calling them "entirely without merit."

Lex Greensill in the Witness Box

The London trial, which began in June 2025, saw Lex Greensill testify publicly for the first time since his firm's demise. During cross-examination, he claimed that he was "strong-armed" by SoftBank into the Katerra restructuring deal. He testified that a "code of silence" surrounded the transaction, which he alleged was structured to prevent SoftBank from having to report potential losses on its own accounts. He portrayed himself as being caught "between a rock and a hard place," trapped between SoftBank's need for secrecy and his obligations to investors. His testimony adds another layer of complexity to the legal battle.

A Path to Recovery for Investors

For the thousands of wealthy investors who had their money trapped in the funds, the road to recovery has been long. After its takeover, UBS assumed responsibility for recouping the outstanding money. By June 2024, more than three years after the collapse, UBS announced a significant step forward. It made an offer to the fund investors to redeem their units at 90% of their value as of February 2021, when the funds were frozen. This offer provides investors with certainty and a faster exit, though it still represents a substantial loss for many.

A Legacy Matter for UBS

UBS has been clear in its position on the Greensill affair. In a statement addressing the Finma document and the ongoing legal cases, the bank has consistently referred to it as a pre-existing Credit Suisse problem. The bank emphasises that the misconduct and poor risk management detailed in the various investigations all happened before its emergency acquisition of its former rival. While UBS is now responsible for the clean-up operation, including managing the lawsuits and investor repayments, it is keen to distance its own brand and governance from the failures that led to Credit Suisse's downfall.

The Aftermath in Australia

Greensill's failure also triggered a crisis for its largest client, GFG Alliance, with severe consequences for its operations in Australia. The Whyalla Steelworks in South Australia, owned by GFG, faced extreme financial distress. By early 2025, the facility was losing $1.5 million per day and its total debts had mounted to $1.3 billion. The situation became so dire that the South Australian government was forced to intervene, placing the steelworks into administration to save it from total collapse, a move that put the future of thousands of jobs in jeopardy.

The Political Fallout Continues

In the UK, the political controversy surrounding David Cameron's lobbying for Greensill continues to resonate. The affair exposed what critics described as gaping holes in the rules governing lobbying and the "revolving door" between public office and the private sector. Multiple parliamentary committees launched inquiries into the matter, questioning the appropriateness of a former prime minister using private channels to petition serving ministers on behalf of a commercial enterprise. Although Cameron was cleared of breaking any rules, the scandal led to calls for urgent reform to strengthen transparency and accountability in British politics.

Lessons from the Wreckage

The story of Credit Suisse and Greensill Capital is a stark reminder of how failures in corporate governance can lead to catastrophic outcomes. Finma, the Swiss financial authority, determined that a string of damaging events, management errors, and an inability to address serious deficiencies in risk management ultimately destroyed client and market confidence in the bank. The bank met its regulatory capital requirements, yet still collapsed in a digital bank run, proving that rules alone cannot save an institution that has lost its reputation. The saga serves as a cautionary tale for the entire financial industry about the dangers of chasing profits while ignoring fundamental principles of prudence and responsibility.