Greensill crisis: Bank of England asks UK lenders to disclose exposure | Business
The Bank of England has asked British lenders to disclose their exposure to Greensill Capital, as the troubled supply chain finance firm prepares to file for administration in the UK.
Grant Thornton is lined up to carry out the administration of the firm’s UK business, which is expected to be confirmed on Monday.
It will pave the way for a pre-pack deal with the private equity firm Apollo Global Management, allowing the business to cherrypick the best assets out of administration.
However, Apollo is not expected to pick up a tranche of loans extended to Greensill’s largest borrower, GFG Alliance, adding to the pressure on the steel empire headed by Sanjeev Gupta that employs 5,000 people in the UK.
Greensill, which allows businesses to borrow money to pay their suppliers, was thrown into crisis after its own financial backers including the insurer Tokio Marine, the banking group Credit Suisse and the Swiss finance house GAM Holding withdrew support amid concerns about the firm’s management and the growing pile of loans issued to GFG Alliance.
The troubles at Greensill have caught the attention of regulators including the Bank of England. The central bank’s Prudential Regulation Authority – which is in charge of monitoring financial stability in the UK – recently asked banks to reveal how much of their business is linked to Greensill or GFG Alliance.
The Guardian understands that the PRA assessment found no material exposure, meaning Greensill’s imminent collapse or any resulting financial trouble at GFG Alliance is unlikely to cause harm to other banking customers or the wider UK financial sector.
A source close to the Bank of England emphasised that the review was part of its normal supervision of UK lenders and was not driven by worries over wider financial stability.
While Greensill’s parent company is registered in Bundaberg, the Australian home town of its founder, Lex Greensill, the majority of its business is based in London, where it employs about 1,000 staff.
Greensill, GFG Alliance and the Bank of England declined to comment.
The European Central Bank has also asked EU lenders to disclose their exposure to both Greensill and GFG Alliance, according to the Financial Times. The ECB declined to comment.
It comes after the German regulator banned the lender’s local subsidiary from doing business last week.
Gupta’s business empire owes Greensill an estimated £3bn, according to the Sunday Times, but reportedly halted payments in recent days.
The Bank of England has forced GFG Alliance to inject about £75m into Wyelands Bank, a lender in which Gupta is a shareholder. It is understood that the regulator’s decision followed longstanding concerns about the bank’s business model.
Wyelands will use the money to return cash to its almost 15,000 savers in Britain, who made £726m in deposits, according to its 2019 annual report. The bank said last week it is “solvent and has sufficient financial resources to meet all of its obligations and repay all depositors.”
Apollo was not immediately available for comment.