How Lex Greensill’s company collapse led to Credit Suisse going down

The shock collapse of huge century-old bank Credit Suisse can be traced back to an unlikely source – the cane fields of Queensland.

The Swiss financier took a multibillion-dollar hit in 2021 when Greensill Capital spectacularly crashed after it ran out of cash.

Scion of a prominent Bundaberg farming family, Lex Greensill lived large on his $6 billion company’s success after rising from humble beginnings.

He strode the world stage and counted among his senior advisers former foreign minister Julie Bishop and onetime British prime minister David Cameron.

The 46-year-old was even invested as a Commander of the Order of the British Empire by then-Prince Charles in 2017 for services to business.

But unknown to many of his investors, his company was playing a risky game of packaging up risky loans it made to clients and selling them to other firms like Credit Suisse.

To provide security for this high-risk activity that convinced Credit Suisse to buy them, Greensill needed working capital insurance so if the loans defaulted the buyers would still get paid.

But its strategy unravelled when its insurer, small Sydney firm The Bond & Credit Co, was bought out by Japanese heavyweight Tokio Marine Management.

Worried about the level of risk in Greensill’s dealings and having learned the US$4.6 billion of coverage BCC gave it was above its risk limits, Tokio Marine advised in July 2020 that it would cease insurance on March 1, 2021.

Greensill scrambled to find another insurer but no one big enough would do it, and once the policy lapsed, Credit Suisse froze US$10 billion in funding.

Without the Swiss bank’s financial lifeline, Greensill crashed and burned within days, owing more than $1 billion to creditors.

Lex Greensil was invested as a Commander of the Order of the British Empire by Prince Charles in 2017 for services to business. He is pictured at Buckingham Palace with wife Vicky 

Credit Suisse was able to claw back about US$7 billion of its investment but lost the rest, as did the bank’s investors.

The bank filed 18 insurance claims worth US$2.2 billion, Tokio Marine refused to pay up, claiming Greensill acted ‘fraudulently’ by failing to disclose information.

Just four weeks after Greensill went down, Credit Suisse lost US$4.7 billion in the collapse of American hedge fund Archegos.

This was followed by a series of scandals, fines, and less substantial losses that cost the bank billions of dollars more.

Credit Suisse will be bought out by rival UBS, with thousands of jobs at risk. 

Regulators were scathing in their criticism of how Credit Suisse dealt with Greensill, and its offices were raided to seize documents for investigations into the failed firm.

Swiss regulators found the bank ‘seriously breached’ its obligations and ignored concerning signs about its business model.

Greensill lives with his doctor wife Vicky and their two children in an old vicarage (pictured) in the village of Saughall near Cheshire, about 300km north-west of London

A damning report by the Swiss Financial Market Supervisory Authority, known as FINMA, found it had ‘little knowledge and control’ over some of its dealings with Greensill.

‘The bank used employees who were themselves responsible for the business relationship with Greensill and were therefore not independent to deal with critical questions or warnings,’ the report found.

‘Credit Suisse even repeatedly asked Lex Greensill himself and relied on answers in his own statements. 

‘For these reasons, the bank made partly false and overly positive statements.’

The report’s conclusion declared the bank seriously breached its duty to ‘adequately identify, limit and monitor risks in the context of the business relationship with Lex Greensill over a number of years’.

Greensill’s demise was a swift fall for a man who said his business was motivated by his own farming family’s financial struggles – sometimes waiting years to be paid by creditors.

Alexander David ‘Lex’ Greensill was born in Bundaberg where his parents grew sugar cane, sweet potato and melons and he was expected to follow them into the family business.

Instead, Greensill graduated from Kepnock State High School and studied law by correspondence through Queensland University of Technology.

He got a job as a clerk with a local solicitor, moved to Sydney and in 2011 he was off London where four years later he joined Morgan Stanley then Citigroup.

The collapse of Greenhill Capital came quickly after global wealth manager Credit Suisse suspended $10 billion of investment funds. It is a swift fall for a man who said his business was motivated by his own family’s financial struggles

Greensill has now grounded his fleet of four private jets and now has little use for his suite of offices across the road from the Savoy Hotel in London. He is pictured being invested as a Commander of the British Empire by Prince Charles

He served as a senior advisor to Cameron on ‘supply chain finance’ and had an office at 10 Downing Street. (He also once worked for US president Barack Obama). 

Greensill had seen first-hand the impact late payments by retailers to his family and went out on his own in 2011, founding Greensill Capital, based in London. 

The company specialised in providing small and medium-sized businesses access to so-called working capital finance to run their day-to-day operations.

This meant offering early payment to cover money due to be paid by bigger companies and government agencies.

Greenhill would charge the businesses seeking early payment a fee of about one per cent of the sum provided and it would be be paid in full by the suppliers’ customers when the invoices were settled.

‘We unlock capital so the world can put it to work,’ its website stated. ‘No other bank or financial services company has our passion and expertise.’ 

The company expanded quickly and Greensill Capital provided $143 billion worth of finance to more than 10 million customers in 165 countries. 

Greensill had seen first-hand the impact late payments by retailers to his family and went out on his own in 2011, founding Greensill Capital, based in London. A Gulfstream jet owned by Greensill Capital is pictured

The company expanded quickly and Greensill Capital provided $143billion worth of finance to more than 10 million customers in 165 countries. The interior of one of Lex Greensill’s jets is pictured

Greensill had offices in Sydney, London, New York, Chicago, Frankfurt, Johannesburg, Singapore, Bogota and Bremen with more than 800 global employees. 

‘I had big dreams and I’m obviously thrilled but I would be lying if I said this was what I expected,’ Mr Greensill told his local paper, the Bundaberg News-Mail, in 2019.

Greensill claimed blue-chip clients such as Airbus, Vodaphone and General Mills but 90 per cent of the company’s revenue came from just five customers, according to documents tendered in a London court. 

More than half of Greensill’s business came from British-Indian billionaire Sanjeev Gupta, whose businesses include a steelworks in South Australia’s Whyalla.

In a speech at his old university in August 2019 Greensill said he had been driven by knowing how hard it was for farmers in regional Queensland to secure finance.

Two years ago Greensill spent $4.1 million to buy a three-level beachfront home at Bargara near Bundaberg called The Glass House’, setting a new real estate price record for the region

‘At all times my feet are still on the red soil ground of Bundaberg… farming teaches you humility and that keeps it real,’ Lex Greensill told a Queensland University of Technology audience. His home near Bundaberg is pictured 

He told that audience how he still got back behind the wheel of a sugar cane harvester 18 hours after meeting a bank boss in Tokyo.

‘At all times my feet are still on the red soil ground of Bundaberg… farming teaches you humility and that keeps it real,’ he said.

‘My only claim to fame is that I’m the only boy from Bundaberg ever to have an office at number 10 Downing Street.’

That same year Greensill spent $4.1 million to buy a three-level beachfront home at Bargara near Bundaberg called The Glass House’, setting a new real estate price record for the region.

Greensill in October 2020 talked of selling a ‘small stake’ in his company for hundreds of millions of dollars – suggesting it was worth more than $6 billion. 

By early 2021 Greensill Capital was on the verge of bankruptcy and its German subsidiary was closed on March 3 by the country’s financial regulatory authority. 

Lex Greensill once strode the world stage and counted among his senior advisers former foreign minister Julie Bishop (right) and onetime British prime minister David Cameron (left)

Later in March the company revealed it was in ‘severe financial distress’ and unable to repay a $140 million loan to Credit Suisse.  

Greensill Capital filed for insolvency protection on March 8 and has since come under legal and parliamentary scrutiny. 

Lex Greensill said he took full responsibility for the collapse of his finance group ahead of being questioned by British lawmakers. 

‘I bear complete responsibility for the collapse of Greensill Capital,’ he said in a video statement.

But in the same breath he blamed everyone but himself, including Tokio Marine and Credit Suisse.

‘It is deeply regrettable that we were let down by our leading insurer, whose actions ensured Greensill’s collapse, and indeed by some of our biggest customers,’ he said. 

Greensill has also said a decision by the company’s leading insurer Tokio Marine to withdraw cover ultimately led to the group’s failure.

Forensic accountant Stephen Clapham told Bloomberg he had examined some of Greensill’s packaged loans and was unimpressed.

In 2018 Greenill told the Australian Financial Review that he was ‘still a farmer at heart.’ ‘Bundaberg is my home,’ he said. ‘It’s where I came from, and I visited there about eight times last year with my wife’

‘There were red flags everywhere,’ he said. ‘If I were a professional investor, it would literally take me five minutes to decide that this was uninvestable.’

Cameron, who became an adviser to Greensill in 2018, has become embroiled in the disaster, giving evidence before two British parliamentary committees about his involvement in the company. 

The Treasury Committee released dozens of texts and emails Cameron sent to ministers and senior officials appealing for help in gaining access for Greensill to Covid-19 support programmes.

Greensill lives with his doctor wife Vicky and their two children in an old vicarage in the village of Saughall near Cheshire, about 300km north-west of London.

But he grounded his fleet of four private jets and has little use for his suite of offices across the road from the Savoy Hotel in London. 

Fortunately, Greenhill’s two brothers still run the 3,000 hectare family farming operation across four properties. 

In 2018 Greenill told the Australian Financial Review that he was ‘still a farmer at heart’.

‘Bundaberg is my home,’ he said. ‘It’s where I came from, and I visited there about eight times last year with my wife.

‘I’m a farmer at heart. Whenever I’m home I jump on a tractor and have a play. I don’t think of myself as a corporate titan.’ And now he’s not.