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The Greatest Risk Was Not Reported

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A local rating agency failed to talk about the elephant in the room.

Greensill Bank’s risk through its involvement in the GFG group of steel magnate Sanjeev Gupta was greater than the rating report of a local rating agency in Berlin indicated. The Greensill Bank AG Issuer Rating Report, which established a rating of A- (Single A Minus) in 2019, did not contain any indication of such an extent of this risk. It is not clear from the report whether the risk was recognized at all or whether it was intentionally not mentioned.

The benevolent rating was retained until September 2020, just six months before Greensill Bank went bankrupt. In September 2020, the rating was downgraded to BBB + (Triple B Plus), which is still “investment grade”.

According to the insolvency report that FinanzSzene.de quotes, the “Gupta Group” accounts for a whopping 2.95 billion euros of the total of 3.86 billion euros in receivables – the equivalent of 76%.

The Berlin rating agency is used, among other things, by the entrepreneurs involved in the agency to obtain ratings for their companies and to effect officially recognized credit ratings in accordance with the EU regulation on credit rating agencies.

Greensill Bank was one of the clients of the rating agency in Berlin, which gave the bank an “investment grade” rating. The Chairman of the Supervisory Board of Greensill Bank, Maurice Thompson, was both an investor and a member of the advisory board of the responsible rating agency. To provide so called “credit ratings”, that rating agency in Berlin operates under the name “Scope Ratings GmbH”.

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