It’s a familiar story. A world awash with liquidity, the desperate search for yield, illiquid assets, combined with a relatively new take on an old financing technique, all dressed up with some swanky technology. Greensill Capital, blessed with political patronage, grew at breakneck speed — a characteristic often suggesting excessive risk taking. Throw in another age-old sin — concentration risk — and there were all the hallmarks of spectacular failure.
Supervisors should have been more alert. Even more so given that hedge fund Bronte Capital had warned the Australian Prudential Regulation Authority in November of possible issues with Greensill Capital. The UK’s Financial Conduct Authority should also have been more on the ball, given the firm had a major UK presence.
