Greensill crisis threatens steel supply chain

The imminent collapse of supply chain finance firm Greensill Capital threatens to disrupt supply chains, after Swiss asset managers Credit Suisse and GAM Holdings AG withdrew their support and the non renewal of its trade credit insurance. 

According to Reuters, London-based and Australia-registered Greensill Capital is preparing to file for insolvency.

Credit Suisse said “a certain part of the subfunds’ assets is currently subject to considerable uncertainties with respect to their accurate valuation.” It comes amid concerns Greensill is overexposed to a single client, believed to be entities associated with steel tycoon Sanjeev Gupta.

Both the Bank of England and German regulator BaFin have taken decisive action to limit major fallout.

The Prudential Regulatory Authority has ordered Wyelands Bank, controlled by Gupta, to return deposits to its savers.

In a statement, the Bank of England said: ”[Wyelands] has the resources it needs to repay all depositors in full and we have required it to operationalise an orderly repayment of its deposits.” 

Wyelands is part of the GFG Alliance, which owns operations around the world, including Liberty Steel Group.

In the UK, trade unions have voiced their concern the financial woes at Greensill will impact thousands of industrial jobs. Gupta is known as the “Saviour of Steel” after he bought up several struggling steel firms.

Gupta has recapitalised the business with a cash injection of £75m. In a statement, he said: “After the turmoil created by both Brexit and the pandemic, the shareholders of Wyelands have recapitalised the business to ensure retail depositors are repaid in full.”

Meanwhile, German watchdog BaFin has issued a ban for subsidiary Greensill Bank AG on disposals and payments as ”there is an imminent risk that the bank will become over-indebted”.

It added that “Greensill Bank AG is not systemically important. For this reason, the institution’s distress poses no threat to financial stability.”

”During a special forensic audit, BaFin found that Greensill Bank AG was unable to provide evidence of the existence of receivables in its balance sheet that it had purchased from the GFG Alliance Group,” the regulator said in a statement.

”For this reason, BaFin has already taken extensive measures to secure the bank’s liquidity and to limit risks for Greensill Bank AG and has appointed a special representative for the bank.”