Credit Suisse Releases Full Q&A of $10 Billion Greensill Fund & 1,400 Swiss Leak Accounts
8th April 2022 | Hong Kong
Credit Suisse has released the full Q&As of $10 billion Greensill supply chain fund and Swiss Leaks of 1,400 accounts since 1940s. On 11th March 2022, Credit Suisse had received a letter from the Ethos Foundation and other shareholders requesting information on the Supply Chain Finance Funds (SCFF) and (ii) “Swiss Leaks”. Q&As include When did Credit Suisse Group’s governing bodies learn of the first indications of a default by Greensill? Does this mean that the investors in the “investment grade” funds will not suffer a loss? How was the business relationship with the Greensill Group established? Credit Suisse (Swiss Leaks): “Allegations raised ranged from the 1940s and approx 90% of the matters / names are at least in part already known to Credit Suisse and have been subject to various internal reviews and assessments over the many years involved.” View below for selected FAQs
” Credit Suisse Releases Full Q&A of $10 Billion Greensill Fund & 1,400 Swiss Leak Accounts “
Credit Suisse Reply: Greensill & Swiss Leaks
On Greensill
When did Credit Suisse Group’s governing bodies (in particular the Board of Directors, Executive Board, Risk Control, Compliance) learn of the first indications of a default by Greensill?
On 22.02.2021, the then Chief Risk Officer (see supplementary question (i)) of CS Group was informed by Greensill that Tokio Marine had not renewed the policy (see supplementary question (ii)) for hedging the credit risk and that it would accordingly expire on 28.02.2021. This meant that Greensill was no longer able to issue insured notes. Since notes with credit insurance were Greensill’s main product and Greensill was unable to find a new insurer, Greensill then immediately ceased operations. The Chief Risk Officer passed on the information about the termination of the insurance policy to CSAM as soon as she received it and also communicated this to the Executive Board, which then informed the Board of Directors. There were no earlier indications of a collapse of Greensill (see supplementary question (iii)).
Does this mean that the investors in the “investment grade” funds will not suffer a loss?
Despite the full redemption of the notes, it is anticipated that investors in these funds will not receive back quite 100% of NAV as per 25.02.2021, as certain costs associated with the liquidation will be charged to the SCF Funds. However, we currently expect that investors will receive at least 99% of this NAV.
Please indicate the breakdown of these private banking clients between (i) managed clients, (ii) advisory clients and (iii) execution only clients. Is the 57% expressed in terms of number of clients or in terms of AUM/interests in the funds?
The volume of funds (AuM) placed with Private Banking clients (in total, approximately 69% of the total volume of SCF Funds as of 25.02.2021) broke down as follows:
▪ Asset management mandates: approx. 12%
▪ Execution-only and advisory clients: approx. 57%.
How was the business relationship with the Greensill Group established?
In March 2016, Greensill contacted CSAM and presented the idea of a fund with securitized Trade Receivables. Lex Greensill, CEO of Greensill, presented the concept of such a fund himself and explained the services Greensill could provide to operate a fund. Greensill offered to enter into a Warehousing Agreement with CSAM for this purpose. Pursuant to this Warehousing Agreement, Greensill would locate suitable debtors, acquire receivables, securitize them, and structure the notes, which would then be sold to the new SCF fund. Part of the services to be provided by Greensill was also the monitoring of the debtors as well as the insurance of the receivables.
On Swiss Leak
What specific actions did Credit Suisse Group take (or intend to take) after being contacted by the media that published “Swiss Leaks” (both in relation to the accounts mentioned in the publication and in relation to the general review of its client acquisition policies)?
By the time the first publications appeared in the media, we had carried out a preliminary investigation of 100% of the matters referenced, which linked to 230 names. Allegations raised ranged from the 1940s and approx 90% of the matters / names are at least in part already known to Credit Suisse and have been subject to various internal reviews and assessments over the many years involved. Approx 90% of the involved approx 1,400 accounts, which represents a fraction of the overall number of accounts and names since claimed by the journalists (see supplementary question (i)), were already closed or in the process of closure at the time of receipt of the inquiries from the journalists with closures covering a period of more than 38 years. Approx 100 new names have since been identified based on information released by the journalists via various media outlets including OCCRP and we continue to analyze and assess this information (see supplementary question (ii)), but at this stage our findings remain unchanged as set out below.
We are comfortable that based on the results of our preliminary investigation to date there are no new concerns which have been identified and actions taken were in line with applicable processes and requirements at the relevant time and in accordance with our legal and regulatory obligations.
As we investigate each particular case we also take note of any potential lessons learned that may support the many other enhancements (see supplementary question (iii)) we have made over recent years to our overriding control framework, which applies globally and where minimum standards apply. We may also re-assess based on current standards and our legal and regulatory obligations to ensure we take appropriate actions up until and including filing of Suspicious Activity Reports. We do this re- assessment to ensure that we fully investigate all facts and to eliminate any potential gaps alongside applying current standards where warranted.
It is important to note also that a client relationship with any bank may not initially demonstrate concerns but subsequent information may come to light such as negative news, which may lead to further due diligence and overall exit of relationships in accordance with required standards and legal and regulatory obligations. The important factor is whether the involved bank took all appropriate steps in light of such information and in accordance with applicable standards at the relevant time.
In addition to the investigatory steps outlined above, Credit Suisse promptly launched a forensic investigation with specialist external support to determine whether we have an insider leaking information relevant to the media inquiries and articles.
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