GREENSILL BANK used loans from three European governments to mitigate exposure to companies owned by businessman Sanjeev Gupta and to calm regulators’ concerns over its lending to Gupta’s GFG Alliance, the Financial Times reported.
Last year, Greensill’s Bremen-based banking subsidiary came up with a plan to use government guarantees to balance its credit risk, the newspaper said, citing a report by the bank’s administrator CMS Hasche Sigle.
As per the plan, Greensill would use government-backed loans extended to three GFG companies from France, Italy and the Czech Republic, totaling about $225 million (£184m), as cash collateral against the bank’s existing loans to GFG.
This move was preceded by pressure from the German financial watchdog BaFin to limit its extensive lending to GFG, the report said.
Supply chain finance group Greensill Capital slipped into administration in March.
GFG Alliance, owned by Gupta, had been Greensill’s biggest customer at the time of its collapse.
Greensill’s burst highlighted Gupta’s business practices, with the UK government describing the GFG structure as “very opaque” after declining to rescue it.
Currently, GFG is facing a criminal investigation by the UK’s Serious Fraud Office.
