Greensill collapse

I didn’t see much in non-financial newspapers so far, but I wonder how the Greensill (and GFG Alliance) collapse will turn out, I guess we’ll discover how much systemic risk is still around.

It seeems like Credit Suisse was heavily exposed (over 1bn), with likely some risk management lapses.

There’s a bunch of German cities who were using Greensill to avoid paying negative interest (500M of cash in uninsured accounts, that’s going to be a large hole for many cities, they are already asking for a bailout)

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Some heads are going to roll at Credit Suisse, the head of compliance approved a 160M$ loan a few weeks ago after a negative opinion by the risk management unit.

I don’t think the cities should be bailed out. There needs to be some accountability for your decisions.
If everyone is bailed out no matter what they do, risk stops existing.

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If you’d like to know more context about the whole Greensill story, here is an excellent writeup by Marc Rubinstein :slight_smile:

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Some more you mean, in addition to the 3 who were already put on ice?

Agree, it is a good summary with some minor gaps/mistakes (bridge loan from CS was originally $160m, CS purchased at least 1 component from GAM after GAM fund failed, insurance was for Greensill who in February 2021 tried to force 3 insurance companies in front of an Australian court to continue their coverage, also unclear what Marc wanted to show by exposing the different types of receivables)

Next topics will be what happens to various companies under Sanjeev Gupta’s GFG Alliance, most notably Liberty Steel (first 3 links are free, then paywall) with 30.000 employees across the globe. Liberty Steel also seems to not have been very quick to pay invoices (which is kind of ironic, as the whole case around Greensill centers around reverse factoring, which is supposed to speed up payments). So we are already seeing a next circle of affected parties beyond CS Funds investors, Greensill Bank clients, Greensill customers and investors, GFG Alliance partners. This crisis is going to reverberate for a while.

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If it’s systemic, it’s less a worry since an agreement with Central Banks could be made to fill the gaps.

The whole story in simple words (in German, by NZZ).

Drawing parallels to subprime crisis, where the house of cards collapsed after insurance company AIG pulled out. Back then banks were compared to sausage factories. This time the author uses the metaphor “cat food sold as beef filet”

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