This is seriously bad banking from Credit Suisse

Credit Suisse Group AG ’s effort to recover $10 billion invested in loans from Greensill Capital faces roadblocks because of a complicated structure that makes it difficult for the parties to agree on who owns the loans, according to people familiar with the matter.

A “double trust” structure means that investors in Credit Suisse’s funds have rights to cash flows from the loans held in one trust, but rights to the underlying loans are held in a separate trust, people familiar with the trusts say. These include loans to Greensill’s biggest borrower, GFG Alliance, the metals empire controlled by British-Indian tycoon Sanjeev Gupta.

Well, if this is actually a problem then it’s seriously bad banking. Who actually owns the cash or the debt being rather an important part of making a loan, no?

9 thoughts on “This is seriously bad banking from Credit Suisse”

  1. It’s a toss-up whether Deutsche Bank or Crédit Suisse is the worst bank at the moment. I hope Antonio Horta-Osorio is looking forward to his new job. And yes, if this story is correct, the bank has got itself into a loan situation without any security or rights over cash flows. Almost unimaginable for those who grew up before Big Bang

  2. The Meissen Bison

    Indeed Diogenes, this really has nothing much to do with banking qua banking and all to do with the wizardry twixt Zurich and Vaduz.

  3. I don’t understand these things. Neither, it seems, does Credit Suisse. How do they keep a straight face when drawing their salaries, these people?

  4. I can’t access the WSJ article, but t’internet suggests these double trust structures are mainly used for privacy (the examples I found were mainly to do with private jet ownership).

    Does the WSJ article explain in detail?

  5. I presume Anstalten in Liechtenstein were involved? Those strange foundations that are, at the same time, wholly independent from and yet who act on instructions from their trustees.

  6. ‘ double trust structures’, ‘high IQ bankers’, ‘Anstalten in Liechtenstein’… I shall not even attempt to understand how it works, but the phrase ‘too clever by half’ comes to mind.

  7. No, ‘Dunning-Kruger’ is not really the same thing, that’s just over-estimating of one’s ability; the ‘too clever by half’ have plenty of ability and an excess of confidence, but they become lost in a maze of their own schemes and never consider what become of ‘the best laid plans…’

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