Boss: Greensill Capital, run by financier Lex Greensill (pictured) collapsed in 2021
UBS will take a £700m hit after offering to refund money to investors caught up in the collapse of financial firm Greensill Capital.
The Swiss banking giant has offered to pay former Credit Suisse clients 90 percent of the value of funds linked to Greensill.
Last year, UBS took over scandal-plagued Credit Suisse as it teetered on the brink of a collapse that threatened to send shock waves through the global banking sector.
UBS inherited a number of issues from its former rival.
Among them was the collapse three years ago of £8 billion in supply chain finance funds linked to British firm Greensill Capital.
Greensill’s business model involved providing short-term financing, which meant companies could pay suppliers more quickly.
These loans were packaged and sold to investors through Credit Suisse. Investors would buy a portion of the loan package and get paid when they are 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 £2bn remains outstanding.
UBS said yesterday that it had made an offer to buy back fund shares sold to investors, at 90 percent of the net asset value determined on February 25, 2021, less any payments they had already received since then.
It opened yesterday and will remain available until July 31.
The £700m cost of the plan will be taken from the £3bn fund 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 run-up to its own demise.
Weakened by more than £100bn withdrawn by nervous customers in just a few months, it succumbed last year after a regional banking crisis in the United States.
The Greensill episode was embarrassing for the Foreign Secretary and former Prime Minister, Lord Cameron.
After resigning as prime minister, he advised Greensill boss, financier Lex Greensill, and was criticized by MPs for a “significant lack of judgement” in trying to secure the company’s access to taxpayer-backed Covid loan schemes.