Greensill Collapse Ruined Italian Aigis Banca
The fallout from Greensill’s collapse impacted Milan based SME loans specialist Aigis Banca, which was forced to liquidate by the Bank of Italy. Venice based Italian bank Banca Ifis purchased Aigis Banca’s assets for EUR 1. Banca Ifis said it was taking over EUR 29801 of loans and EUR 135 million of Italian sovereign bonds from Aigis, along with EUR 44001 of its customer deposits. The bank added that securities related to Greensill were excluded from the transaction. Italy’s Interbank Deposit Protection Fund also provided €4901 to support the transaction. Banca Ifis CEO Mr Frederik Geertman told the Financial Times that doing so would ultimately salvage Aigis’ reputation. He said “The intervention makes it possible to avoid the severe social and an economic consequence of the situation that has arisen in Aigis Banca as a result of the latter’s exposure towards Greensill Bank.”
As per Financial Times report “Aigis Banca’s problems stemmed from investment products linked to invoices it had purchased from Greensill. These included receivables-backed notes linked to Mr Gupta’s metals empire, with a document seen by the FT showing that the bank had exposure linked to his Liberty Commodities business. While the investment products that Aigis bought from Greensill were covered by insurance policies, these are yet to pay out.”
According to people familiar with the matter and a document from Germany’s financial regulator BaFin, Mr Gupta entered discussions to buy a stake in Aigis Banca last year, which was majority-owned by private equity firm Metric Capital. The BaFin document shows German officials held a conference call in October with the Bank of Italy and the European Central Bank regarding Mr Gupta’s planned acquisition of a significant stake in Italy’s GBM Banca, Aigis’s previous name before it rebranded at the end of last year.
As well as using Greensill as a source of finance, Mr Gupta owned his own bank in the UK called Wyelands Bank. He looked to acquire a stake in Aigis at a time when Wyelands was coming under increasing pressure and scrutiny from regulators. Wyelands Bank announced earlier this month that it is to be sold or wound up, after its accounts revealed that repayments on 80 per cent of its loan book were overdue. The Bank of England ordered Gupta’s bank to repay customer deposits in March, amid rising concerns over its financial position.
SteelGuru has put key moments that precipitated Greensill Bank's fast decline and eventual collapse, when Greensill Bank went into administration on 8 March, it sent shockwaves through communities as the scale of its demise became apparent.
1 March: British Business Bank Removes Guarantee on Loans to Greensill - Britain’s state owned business bank stripped Greensill Capital of a government guarantee on loans to Mr Sanjeev Gupta’s empire, after deciding it had breached the terms of pandemic lending programmes. British Business Bank has informed Greensill that it is removing a taxpayer guarantee following an investigation into the UK based fintech company's compliance with the rules of the Coronavirus Large Business Interruption Loan Scheme.
1 March: Credit Suisse Pulls the Plug - Greensill’s distinctive supply chain finance loans, packaged into securities managed by Credit Suisse, hit a snag when GFG Alliance defaults on a USD 140 million loan citing COVID-19-related economic downturn. In response, Credit Suisse closes funds worth USD10 billion. Concerned about Greensill’s close link to steel tycoon Mr Sanjeev Gupta, the bank is forced to sell the assets.
2 March: Market Developments Force GAM’s Hand -With Greensill now treading water, Swiss asset management firm GAM opted to freeze the company’s receivables funds. GAM cites ‘market developments’ and media coverage relating to supply chain finance as its reasons.
3 March: BaFin Suspends Greensill - German regulators banned its German subsidiary Greensill Bank from doing business and reportedly filed a criminal complaint against management. German Federal Financial Supervisory Authority Bundesanstalt für Finanzdienstleistungsaufsicht issued a ban for Greensill Bank AG on disposals and payments as there is an imminent risk that the bank will become over-indebted. In addition, BaFin ordered that the bank be closed for business with customers and prohibited it from accepting payments that are not intended for repaying debt to Greensill Bank AG.
4 March: GFG Alliance Halts Repayments to Greensill - With BaFin going so far as to accuse Greensill Bank of criminal negligence, GFG Alliance’s reliance on Greensill, a relationship long held in suspicion by UK and German regulators, is laid bare. Subsequently, Gupta orders that repayments to Greensill Capital are to cease immediately.
8 March: Australian Regulators Scrutinise Credit Suisse Unit over Greensill - Australian regulators started scrutinising Credit Suisse’s Australian outpost’s involvement in Greensill Capital and potential exposure to Greensill and its key clients. Australian Securities and Investments Commission and the Australian Prudential Regulation Authority had separately approached the bank’s management, with separate lists of questions for the bank. Australian Prudential Regulation Authority’s questions were focused on Credit Suisse Australia’s balance sheet exposure to interest is much broader and included Credit Suisse’s conflict management systems and due diligence practices.
8 March: Greensill Goes into Administration - After the weekend of 6 & 7 March has passed, Greensill went into administration. Unable to repay a USD 140 million loan to Credit Suisse and hit by defaults from its key customer GFG Alliance, Greensill Capital has filed for administration. Greensill was thrown into crisis after its main insurer Japanese behemoth Tokio Marine Holding’s Bond & Credit Company refused to renew a USD 4.6 billion contract and Credit Suisse froze USD 10 billion of funds linked to the firm, depriving it of an important source of funding.
12 March: Night in White Armour Apollo Pulls Out - US private equity firm Apollo Global Management, which has made a USD 59.5 million cash offer for Greensill Capital's IT systems and intellectual property after it filed for administration on March 8th, halted talks to acquire parts of Greensill following an escalating stand off with US company Taulia, which once provided technology to the supply chain finance group, as Taulia looked to move its users to other providers, primarily the US bank JPMorgan.