UBS continues to clean up Credit Suisse’s mess. This time, it is about the Greensill scandal, a company which went bankrupt in 2021, and with which the bank offered investment funds. In total, clients had invested nearly $10 billion there. UBS announces today that it wants to reimburse investors up to 90%.
The Greensill affair is special, because it is one of the two big scandals of 2021, before the Archegos fiasco, when the bank lost more than 5 billion dollars. These two cases, which occurred a few weeks apart, played a key role in the debacle of Credit Suisse, as they damaged the bank’s credibility.
>> Read again on this subject: The Credit Suisse scandals that make it easy prey
In both cases, they showed to what extent risk management was failing. Even though it tried, the bank never really recovered after these two cases.
10 billion dollars to pay off
UBS must now recoup the $10 billion that was invested. The number one Swiss bank should be able to do this, first of all because a large part of the funds have already been recovered after the freezing of funds and returned to investors. We are talking about 7 billion out of the 10 in total. UBS is now proposing to wipe the slate clean by returning 90% of the value of the funds to investors.
The second reason is that UBS has the funds: it itself will provision almost a billion. This means that she thinks some of it can be salvaged, but not all of it. However, this should not have an impact on its results and its financial health since it had put funds aside – provisions – at the time of the buyout, precisely to deal with possible ghosts in the cupboards of Credit Suisse.
A difference in strategies
Enough to illustrate the difference in strategies between the two banks: UBS has always, or almost, had the principle of paying and moving on. While Credit Suisse has always contested, scuffled with the authorities or taken to court, which has rarely been to its advantage.
On the side of aggrieved investors, the time is not necessarily one of satisfaction. Caution remains in order until the details of the proposal have been examined.
Mathilde Farine/kkub
