UBS to take £700m hit after pledge to pay back investors 90% of Greensill Capital losses

UBS will take a £700million hit after offering to pay back investors caught up in the collapse of finance firm Greensill Capital.

The Swiss banking giant has offered to pay the former Credit Suisse customers 90 per cent of the value of the Greensill-linked funds. 

UBS took over scandal-plagued Credit Suisse last year when it was on the verge of a collapse that threatened to send shockwaves through the global banking sector.

UBS inherited a series of issues from its former rival.

Among them was the collapse three years ago of £8billion in supply chain finance funds linked to UK firm Greensill Capital.

Greensill’s business model involved supplying short-term finance, which meant companies could pay suppliers more quickly. 

These loans were packaged up and sold to investors, via Credit Suisse. The investors would buy a share of the loans package and cash in when they were repaid.

The loans were insured. But in March 2021, Greensill’s main insurer Tokio Marine decided not to renew its policy, precipitating its collapse days later.

Credit Suisse has recovered some of the funds but £2billion remains outstanding.

UBS said yesterday that it has made an offer to buy back fund units sold to investors, at 90 per cent of the net asset value determined on February 25, 2021, minus any payments they had already received since then.

It opened yesterday and will remain available until July 31.

The £700million cost of the scheme will be taken from the £3billion pot set aside when UBS acquired Credit Suisse to cover potential litigation and regulatory costs.

Greensill was one of a litany of entanglements that ensnared Credit Suisse in the period leading up to its own demise. 

Weakened by more than £100billion being pulled out by jittery customers in the space of just months, it succumbed last year after a regional banking crisis in the US.

The Greensill episode was embarrassing for Foreign Secretary and former Prime Minister Lord Cameron. 

After quitting as PM, he advised Greensill’s boss, financier Lex Greensill, and was criticised by MPs for a ‘significant lack of judgment’ in trying to secure access to taxpayer-backed Covid loan schemes for the firm.