Lord Myners, the former City minister, has taken aim at the UK financial regulator for failing to spot red flags at Greensill Capital, the embattled supply chain finance firm which last week plunged into administration.
“It’s very disappointing that neither the government nor the regulator has taken any interest,” Myners told Financial News.
Softbank-backed Greensill fell into administration on 8 March after Credit Suisse closed four investment funds which provided vital funding to the business. Credit Suisse initially froze the funds over concerns about Greensill’s exposure to one client — steel magnate Sanjeev Gupta and his GFG Alliance Group.
However, on 5 March it took the decision to wind down the funds citing valuation uncertainty, the reduced availability of insurance coverage for new investments and the substantial challenges to source suitable investments.
GAM, the Swiss asset manager, also announced it would liquidate a supply chain finance fund which was linked to Greensill.
Greensill’s supply chain finance business is not an activity regulated by the FCA, given that lending is an agreement struck between a buyer, finance provider and supplier.
However, another Greensill entity — Greensill Capital Securities Limited — used ACA Mirabella as a so-called appointed representative in the UK. This allowed Australia-headquartered Greensill Capital to carry out certain activities in the UK, such as arranging the sale of securities backed by Greensill originated assets, and marketing investments to institutional investors.
It was able to conduct these activities under the supervision of Mirabella, which is overseen by the FCA.
Mirabella, which was paid a fee by Greensill for the services it provided, said it “maintained appropriate compliance oversight” of the activities carried out by Greensill Capital Securities. The relationship ceased on 5 March.
Myners said: “We have found that we are in that challenging perimeter of what is and isn’t regulated. Greensill was ostensibly a British company with nearly all its staff and its board operating in the UK.
“And yet it doesn’t appear to fall under clear UK regulatory oversight.”
Myners, who served in Gordon Brown’s Labour government during the financial crisis, has twice called for probes into Greensill. He tabled a submission in the House of Lords last June asking the government to look into “conflicts of interest in the promotion of trade finance bond in association with Greensill”, following a similar submission the previous year.
The former City minister tabled more written submissions at the start of March, including questions to government about how Greensill was regulated in the UK, and how many times civil servants and other government officials met with Greensill and its representatives, including former prime minister David Cameron who acted as an adviser.
Myners told FN the “warning signs around Greensill” were ignored.
“The warning signs were the very rapid growth of this business, and the close association with Gupta,” said Myners.
“There was a symbiosis between Gupta and Greensill, which any seasoned regulator would have said is the sort of thing that could give rise to problems. There was too much dependency between the two.”
“The FCA is culpable in not raising these issues with government in the past.”
Myners added that he was offered a position as a non-executive director on the Greensill board in 2019. The offer came during a meeting with founder Lex Greensill, where Myners was acting in his capacity as chairman of Edelman — the PR and communications firm which counted Greensill as a client at the time.
“I immediately declined it,”said Myners.
Greensill declined to comment.
Myners said the Greensill fiasco was the latest failure by the FCA.
The regulator has come under intense scrutiny for failing to act on concerns raised ahead of the collapse of minibonds provider London Capital & Finance in 2019, as well as its oversight of the former business of UK fund manager Neil Woodford.
The FCA declined to comment. The Treasury was contacted for comment.
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