State bank risked £ 335million to back lender, MPs say

Taxpayers could be held liable for up to £ 335million after a government bank failed to properly examine collapsed lender Greensill Capital, MPs have said.

A report by the Public Accounts Committee on the British Business Bank’s Covid loan program said the checks to endorse the business were “woefully inadequate.”

Greensill then loaned £ 418million to businesses, 80% of which may have to be paid back by taxpayers in the event of default.

Ex-PM David Cameron was an adviser to the lender, which collapsed in March.

A government spokesperson said he was not involved in the decision to accredit Greensill: “The decision was taken independently by the British Business Bank, in accordance with their usual procedures.”

The British Business Bank has been tasked with approving High Street banks and other lenders to provide government guaranteed loans to struggling businesses, as Covid-19 restrictions first took hold. It was a conduit for billions of pounds in emergency loans.

With the help of then-advisor Mr Cameron, Greensill attempted to access several government programs, some of which were rejected. In June 2020, she was approved to lend, under two business interruption loan programs.

The vast majority of loans guaranteed by Greensill’s government went to companies in the Sanjeev Gupta steel empire, GFG Alliance, and the bank eventually suspended loan guarantees after it emerged that Greensill had exceeded the cap. loan of £ 50 million to corporate groups.

But before it got there, MPs discovered that different government departments and agencies did not share their concerns about Greensill and its main client GFG.

“Insufficiently curious”

The MPs report highlighted issues raised with the National Crime Agency over part of the GFG Alliance, Wyelands Bank, which the Treasury and the Department for Business, Energy & Industrial Strategy (BEIS) spoke about, but did not not shared with UK companies. Bank “because they felt it was irrelevant to the accreditation process although Greensill is an important financier for the GFG Alliance.”

MPs said this “lack of information sharing within government,” which has hampered decision-making in response to the pandemic, has allowed Greensill to access taxpayer-funded programs, exposing taxpayers at a risk of £ 335million if Greensill’s directors demand reimbursement.

The British Business Bank has also been criticized for being “insufficiently curious” about media reports questioning Greensill’s lending model and ethical standards.

In May, the Serious Fraud Office opened an investigation into GFG on suspicion of fraudulent trade and money laundering, including its funding deals with Lex Greensill’s company.

Former Tory Prime Minister David Cameron contacted several ministers on behalf of Greensill Capital

The committee of deputies also said that in the government’s rush to encourage lenders to channel emergency business loans, it “struck the wrong balance between making decisions quickly and protecting the interests of taxpayers.”

“With more time and due diligence, the bank might have made a different decision on whether to accredit Greensill,” MPs said.

A British Business Bank spokesperson said: ‘The National Audit Office concluded in July 2021 that the British Business Bank was appropriately implementing a streamlined version of its established process when it accredited Greensill Capital (UK) Limited in as a lender under the Covid-19 business support programs. .

“In the first year of the Covid-19 pandemic, the British Business Bank said it had accredited 171 lenders under three programs to provide government guaranteed loans to more than 1.6 million businesses.

“A less streamlined accreditation process would have meant that fewer lenders would have been accredited and fewer businesses would have received the essential emergency funding they needed during the pandemic,” he added.

“The NAO also saw that it was to the bank’s credit that its post-accreditation monitoring and audit processes quickly detected a potential problem, as they were designed to do.”

The bank said its investigation into potential Greensill Capital rule violations was continuing and that repayment guarantees for 80% of overdue loans remained on hold during this investigation.

The committee said the bank must define “how it will better balance speed of delivery and value for money in the future, and what compromises it is prepared to accept.”

Greensill collapsed earlier this year after his insurer refused to renew coverage on loans he was making.

The finance company was the main lender to Liberty Steel from GFG, which employs 3,000 people in England, Scotland and Wales.