Greensill: Supply Chain Finance and the Risk Behind the Promise

Why Greensill matters to suppliers and buyers in the Mittelstand

Many mid-sized suppliers know the offer: a large customer demands 90 or 120 days' payment terms but also offers to pay the invoice through a financing partner after just a few days, for a small discount. For the supplier, it is convenient; for the customer, it protects its own liquidity. Hardly anyone asks who stands behind the partner.

Greensill Capital made this model big and then overstretched it. This article therefore asks: How did a useful financing tool become a multi-billion risk, and what should a business check before relying on supply chain finance or high-interest deposits? To answer it, we first clarify the terms, describe the documented sequence of events, explain the thinking model of distributing instead of holding, weigh two readings, and finally derive a test for your own business.

What is supply chain finance?

Supply chain finance, also called reverse factoring, connects three parties. A buyer confirms an invoice from its supplier. A financier pays the supplier the amount immediately, minus a discount, and receives the money from the buyer on the due date. Because the risk depends on the buyer, which is often larger and more creditworthy than the supplier, the discount is lower than in ordinary factoring, in which a supplier sells its receivables itself.

The tool has a catch that accounting long failed to make visible. For the buyer, the financed invoice still looks like a trade payable, although economically a financier stands behind it. Sigalı and Memişoğlu (2024) describe how the lack of transparency in these arrangements moved to the center of attention after the collapses of Carillion and Greensill. Since financial years beginning in 2024, the international standard setter IASB has required additional disclosures on such arrangements in the notes.

What happened: the documented facts

Greensill Capital was founded in 2011 by the Australian Lex Greensill and was based in London. The company presented itself as a financial technology firm, financed receivables via a platform, and packaged them into securities that went to investors mainly through funds of the Swiss bank Credit Suisse. The receivables were insured through a credit insurer. In Germany, Greensill had owned Greensill Bank in Bremen since 2014, which collected deposits from private customers, companies, and municipalities, often via deposit platforms.

1. Late February 2021: insurance runs out

   A credit insurer does not renew 4.6 billion dollars of cover beyond March 1. Without insurance, the receivables can no longer be sold as safe.

2. March 1, 2021: funds closed

   Credit Suisse closes the supply chain finance funds it managed with Greensill, worth around 10 billion dollars at the time, and begins winding them down.

3. March 3, 2021: moratorium in Bremen

   BaFin imposes a moratorium on Greensill Bank and closes it to customers. In mid-March, it determines the compensation case.

4. March 8, 2021: insolvency in London

   Greensill Capital files for administration under UK insolvency law.

5. December 2025: charges in Bremen

   The Bremen public prosecutor charges two former management board members and a former supervisory board member of Greensill Bank with insolvency offenses and false accounting. The regional court decides whether to open the main proceedings.

According to reports, the Bremen indictment centers on the 2019 refinancing of steel mill acquisitions in the network of entrepreneur Sanjeev Gupta, worth 2.18 billion euros. The accused are alleged to have presented the lending business as low-risk purchases of receivables. More than half of the bank's loans are said to have been linked to Gupta's companies. According to reports, Lex Greensill is not among those charged in Bremen. In the UK, he is contesting proceedings to disqualify him as a company director. The presumption of innocence applies to everyone involved.

Who bore the damage

The damage was distributed unevenly. Private savers at Greensill Bank were compensated through the statutory and voluntary deposit protection schemes. Municipalities were left empty-handed, because since October 2017 their deposits are no longer covered by the private banks' voluntary deposit protection. According to the German government in April 2021, around 40 towns and municipalities had deposited a total of about 350 million euros with the bank. They are hoping for payments from the insolvency estate.

Investors in the Credit Suisse funds gradually received money back through the wind-down, about half already by April 2021, according to Bloomberg. In February 2023, the Swiss regulator FINMA found that Credit Suisse had seriously breached its supervisory obligations in its dealings with Greensill. According to FINMA, Greensill itself selected and reviewed the receivables, and the bank left it to Greensill to arrange the insurance in its own name. According to FINMA, warnings were handled by employees who at the same time managed the relationship with Greensill.

The thinking model: distributing instead of holding

Banking research has a term for the core of the case: the originate-to-distribute model. A classic bank grants a loan and keeps it until repayment. Because it bears the default itself, it screens the borrower thoroughly. Whoever grants loans in order to pass them on to investors immediately earns from origination, not from repayment. The incentive to screen thoroughly falls. Economists speak of a misaligned incentive, because the risk ends up with someone who did not do the screening themselves.

Greensill fit this pattern exactly. The firm selected the receivables and passed them on to funds; the funds relied on the insurance, and investors on the funds and the name of a large bank. Weller (2023) shows how, through continuous rollover, short-term, liquid receivables became long-term, unsecured financing for risky companies, granted on the basis of relationships rather than market criteria.

An everyday analogy: imagine a relay race in which every runner passes the baton on quickly and nobody checks whether it is still the right one. Each has run their leg cleanly. Yet something different arrives at the finish than at the start.

Whoever sells a risk instead of holding it earns from origination. Whoever buys it should therefore check for themselves what they are getting.

Two readings: misconduct by individuals or a gap in the system?

How one reads the case depends on whether one looks at the people acting or at the structures.

Weller (2023) emphasizes the second side. Greensill, she argues, exploited gaps between regulatory regimes and political influence and operated on the edge of legality. In their case analysis, Bhattacharya and Reddy (2026) see above all a failure of risk management at Credit Suisse, whose leadership chased short-term profit and disregarded rules of due diligence. Ellina and Milman (2023) show from a legal perspective how the UK administration procedure here served orderly realization of assets rather than rescue.

I consider the second reading the more useful one, without prejudging the first. Whether individuals committed offenses is for the courts to decide. That the web held for so long was because every party assumed another had checked. The same pattern appears at Lehman Brothers 2008 and, at a crypto exchange, FTX. Why supervision reaches its limits with financial technology firms is discussed in Fintechs and supervision.

What a supplier risks when the financier fails

For a mid-sized supplier, the most important risk is not the loss of a single payment. It is the sudden end of a channel on which planning has relied. Whoever granted a customer long payment terms only because the financier pays early is left with the full payment term once the financier is gone.

How quickly open receivables tie up liquidity is shown in Late payment and receivables management. How risky a large customer with long payment terms is described in Concentration risk.

The partner test before supply chain finance and high interest rates

From the case, I derive a test that I call the partner test. It applies to three situations: when a customer offers supply chain finance, when you want to pay your own suppliers this way, and when you want to deposit surplus cash with a bank offering conspicuously high interest.

1. Who stands behind it?

   Clarify who finances, who provides the money for the financing, and who supervises. A well-known bank in the brochure is not yet proof of who bears the risk.

2. What happens without them?

   Calculate how long you can manage with the full payment term if the financier stops tomorrow. The figure belongs in your liquidity planning.

3. Why is it so cheap or so well paid?

   An interest rate well above the market or a discount well below it needs an explanation. If it is missing, the risk lies with you.

4. What is protected?

   For deposits, check whether and up to what amount they are covered by statutory deposit protection. For amounts above 100,000 euros, it depends on voluntary protection and its current terms.

How to check business partners systematically is described in Due diligence on business partners.

Conclusion: a promise is only as good as the checking behind it

To the guiding question: a useful tool became a multi-billion risk because Greensill continuously rolled over short-term receivables, extended them to future invoices, and tied them to a few risky companies, while funds, insurers, and investors each assumed the risk lay with someone else. The thinking model of distributing instead of holding explains why screening weakened in the process. Whether individuals acted criminally is open; the courts have not yet decided.

For a business, the lesson is concrete: check every financing channel as if it could end tomorrow, and with every interest rate promise, ask who bears the risk. Supply chain finance remains useful as long as it is an offer and not a precondition.

• List all customers that pay through financiers, with payment terms and the financier's name.
• For the largest of these customers, calculate what a failure of the financier would mean for liquidity.
• For deposits above 100,000 euros per bank, check and document the deposit protection.
• For every interest offer well above the market, write down where the risk lies.