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Three years before the high-profile downfall of Greensill Capital, senior executives at Credit Suisse were already being cautioned against partnering with the Australian financier Lex Greensill. A newly surfaced report from the Swiss financial regulator Finma reveals that as early as 2018, Credit Suisse managers received anonymous alerts warning of reputational and financial risks in their dealings with Greensill. Despite mounting concerns, these red flags were overlooked, setting the stage for a financial disaster that would eventually contribute to the bank’s dramatic collapse in 2023.
I. Early Warnings and Risk Signals Ignored
1. Anonymous Tipoffs Sound the Alarm
According to Finma’s report, released under a London court order during an ongoing trial, anonymous messages to Credit Suisse leadership expressed deep concern about the bank’s relationship with Greensill Capital. The informants questioned the executives’ judgment and flagged the risks of channeling client money into funds tied to Greensill’s loan portfolios. Specific warnings highlighted the exposure to companies within Sanjeev Gupta’s unstable steel empire and referenced a similar collapse of Greensill-backed funds managed by another firm, GAM.
2. Internal Response Revealed a Dismissive Tone
Rather than launching a review, one Credit Suisse executive forwarded the anonymous warning to Lex Greensill himself, advising him to “rethink” his communications strategy. This nonchalant response reflected a troubling attitude toward risk management, suggesting that reputational concerns were being downplayed even as credible threats loomed.
II. The Rise and Fall of Greensill Capital
1. Greensill’s Ambitious Growth Strategy
Founded in 2011, Greensill Capital specialized in supply chain finance—essentially advancing payments to companies based on outstanding invoices. The company marketed itself as a disruptive tech-driven financial innovator and brought on notable figures like former UK Prime Minister David Cameron to lend credibility. At its peak, Greensill was attracting billions in investment from major players including SoftBank and General Atlantic.
2. Lavish Spending and Financial Fragility
Despite its innovative image, Greensill’s financial practices were risky and increasingly questioned. According to the Finma report, rather than using investor funds to scale its operations, the company diverted much of the capital to cover payouts for private backers and inject funds into its affiliated Greensill Bank, which faced regulatory pressure. Greensill’s leadership, under Lex Greensill, indulged in ostentatious spending—custom suits, upscale office spaces, and private jets—all while risks mounted.
III. The Fallout: A Series of Financial and Political Scandals
1. Collapse Triggered by Insurance Withdrawal
Greensill Capital imploded in March 2021 when insurers declined to renew crucial policies that underpinned the firm’s loans. Without this insurance, investor confidence plummeted, and the company could no longer sustain its financing model. The exposure to Gupta’s steel businesses, already under financial strain, amplified the impact and led to widespread losses.
2. Credit Suisse Fund Closures and Client Losses
The collapse forced Credit Suisse to shut down its $10 billion suite of Greensill-backed investment funds. Wealthy clients who had bought into the funds based on their perceived stability and performance were left with staggering losses. The bank’s reputation took a serious hit, especially as it became clear that warnings had been ignored and due diligence was lacking.
IV. Regulatory Repercussions and Investigations
1. Finma’s Two-Year Probe Uncovers Oversight Failures
In response to the debacle, Finma launched a nearly two-year investigation into Credit Suisse’s handling of its partnership with Greensill. The probe uncovered that senior management had repeatedly failed to act on early warnings and had given Greensill too much discretion over client funds. The findings, initially kept under wraps, confirmed that Credit Suisse had “seriously breached its supervisory obligations.”
2. Consequences for Credit Suisse Management
As a result of Finma’s findings, Credit Suisse was subjected to heightened regulatory oversight and new compliance protocols for executive decision-making and partner relationships. Unfortunately, these corrective actions came too late. The damage to Credit Suisse’s credibility and finances was irreversible, and the bank collapsed in March 2023—one month after Finma’s initial report findings were made public.
V. Legal Disputes and Ongoing Recovery Efforts
1. Trial Against SoftBank Brings Details to Light
The Finma report was disclosed as part of a London trial in which a former Credit Suisse investment fund is suing Japanese conglomerate SoftBank for $440 million. The lawsuit alleges that SoftBank orchestrated a complex financial transaction with Greensill that unfairly harmed fund investors. Lex Greensill appeared in court as a witness, though he declined to offer public comments.
2. UBS’s Inheritance and Responsibility
UBS, which acquired Credit Suisse in a government-facilitated rescue deal in 2023, is now tasked with salvaging remaining value for former investors of the Greensill-linked funds. In a statement, UBS distanced itself from the affair, describing it as a “legacy Credit Suisse matter” and clarifying that the mismanagement occurred before its takeover.
VI. Lessons in Due Diligence and Accountability
1. The Importance of Internal Risk Vigilance
This case underscores the need for banks to treat internal and external warnings with the seriousness they deserve. The anonymous messages to Credit Suisse, far from being speculative, offered actionable intelligence. Ignoring these signs demonstrated a failure in corporate governance and risk assessment that ultimately cost the bank its independence.
2. Regulator Transparency and Industry Reform
The partial release of Finma’s findings only during a court proceeding raises questions about transparency in financial oversight. As banks continue to innovate and form global partnerships, regulators must remain proactive and transparent to prevent future collapses of this scale. Credit Suisse’s experience should serve as a stern warning to other institutions about the cost of negligence.
Conclusion
The unraveling of Credit Suisse’s partnership with Greensill Capital is a textbook example of how ignored warnings, unchecked risk, and excessive trust in unproven business models can culminate in financial catastrophe. From internal tipoffs in 2018 to the final collapse in 2023, every stage of this saga highlights the importance of transparency, accountability, and strong regulatory oversight in the financial sector. As UBS attempts to clean up the aftermath, the industry at large must reflect on the hard-earned lessons of one of the most damaging scandals in modern banking history.
