Credit Suisse learned nothing from the failure of the Greater Amman Municipality

Asset manager GAM suffered a shipwreck with Greensill money – then Credit Suisse. It was astonishing, as the big bank had a deep insight into the activities of Grencelle and its main client, Sanjeev Gupta.

At the end of July 2018, Swiss asset manager GAM shocked investors and clients by suspending the star fund manager مدير Tim Haywood And the closing of the absolute yield bond fund (ARBF). One direct consequence was that Credit Suisse (CS) immediately discontinued its sales cooperation with the Greater Amman Municipality.

Three years later, the big bank finds itself in a deep crisis after the finance company Greensill Capital and its main client, the British-Indian entrepreneur in the field of steel and raw materials Sanjeev Gupta collapsed.

CS: Carefully at first, then no more

Gupta was already a major customer of Greensill when GAM’s Tim Haywood was still managing supply chain funds – and ran into very similar problems. Gupta steel mills in Australia are the largest debtor of CS Greensill funds at $1.2 billion.

The unanswered question is how CS managed to go from a prudent and risk-averse GAM sales partner with its own money to a turbocharger for Greensill and Gupta’s businesses. How finews.ch I reported last March that CS had even acquired some of GAM’s “toxic” assets.

Pave the way solo

give an answer David solo. The former CEO of Greater Amman Municipality led the investment banker Lex Greensel And his company in CS-style finews.ch Already notified.

The Greater Amman Municipality only launched its Supply Chain Finance Fund with Greensell in 2015 after leaving Solo. solo, according to “financial times” Greensall’s financier paved the way here, too.

More like a slow seller

The paradox here: GAM money was slow-moving, like two people familiar with the corresponding products finews.ch Say. The amount of investment remained limited and the sales team was not enthusiastic about the products.

The fees were low, the fund structure was complex, and potential clients, especially companies with cash surpluses, were not among the group targeted by GAM.

Eric Farvell felt this opportunity

What a contradiction to CS: like this “financial times” Describes in an article (paid) on Tuesday, an inhaler in particular Eric FarvellCS Asset Management, now fired CEO, is a great opportunity to sell money to wealthy private clients.

More than 1,000 CS Wealth Management clients hold Greensill funds in their wallets and are now hoping for repayment. With a volume of over $10 billion, the funds were among the largest in the CS group.

These products also plunged the Greater Amman Municipality into a deep crisis. Haywood was one of the main buyers of the Gupta bonds. The asset manager experienced massive cash outflows after it was suspended. The Greater Amman Municipality severed its commercial relationship with Gupta only six months ago.

detachable test

The asset manager was busy creating new sales channels in 2018 after splitting from Julius Baer and before that from UBS which caused huge gaps. As a result, CS has become one of the most important sales partners of GAM.

After the Heywood scandal, the big bank subjected all GAM products to close scrutiny. GAM made sure to resume good relations with CS after Haywood’s money expired.

Customer Service Managers Visits

According to observers, the secretariat was in close contact with CS from August 2018 to mid-2019. This gave them a very detailed and transparent insight into GAM and its finances.

For example, if the GAM CFO Richard McNamara While in Zurich, he made one visit to each of the computer services managers to strengthen relationships. Neither CS nor GAM want the opposite finews.ch Leave a comment.

Construction financing on suspicion of fraud

Gupta’s buyout round with struggling steelmakers and raw materials partly forms a common thread in the whole affair: Money for the purchase of Liberty Primary Metals steel mill in Australia in 2017 came from GAM funds, as someone familiar with the adverse transaction finews.ch He said.

The deal, worth about $850 million, was complex and contained an element of securitization that the Financial Times described as good two years ago. The UK’s anti-fraud agency is currently investigating the financing of the Liberty purchase.

The fact that CS got away with the high concentration of Gupta bonds in GAM funds and the major role Greensill played in that seems unlikely given months of due diligence. However, it is not clear if CS has also examined Haywood’s money since the GAM concluded it.

Management and insurance authorization

But it is also a fact that CS acquired some fixed income managers from GAM when there was a downsizing; At least one product specialist was among them. It is also noted that GAM and later CS both relied entirely on Greensell for supply chain finance management.

CS product descriptions illustrate the fact that the money is not managed by the bank. In retrospect, it turns out to be fatal that CS also delegated loan insurance and financing to Greensell.

Glare, naivety, or ignorance

So it appears that GAM’s close product due diligence has missed the actual goal: CS should have better vetted its future business partners Greensill and Gupta.

Whether Greensell blinded the CS system and its business model, was just naive or simply ignored the existing and internally reported risks, it will now be clarified by the hosts of regulators and lawyers.