Investment

The state bank has threatened £ 335m to back the lender, MPs said

Taxpayers could be liable for up to £ 335m after a government bank failed to properly review failed lender Greensill Capital, MPs said.

A report by the Public Accounts Committee on British Business Bank’s Covid loan scheme said the checks to approve the company were “sadly inadequate”.

Greensill has lent £ 418m to companies, 80% of which taxpayers could have to pay if they default.

Former PM David Cameron was an adviser to the lender, who collapsed in March.

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

The British Business Bank has been tasked with approving High Street banks and other lenders to provide government-backed loans to struggling businesses, while restrictions on Covid-19 first took effect. This is a profit for billions of pounds in emergency lending.

With the help of former adviser Mr Cameron, Greensill tried to access several government schemes, some of which were rejected. In June 2020 it was approved to lend, under two business interruption loan schemes.

Most of the government -guaranteed loans from Greensill went to companies within Sanjeev Gupta’s steel empire GFG Alliance, and the bank later suspended the loan guarantees after it emerged Greensill had damaged £ 50m. lending cap to groups of companies.

But before reaching that point, MPs discovered, various government departments and agencies were not sharing their concerns about Greensill and its main client GFG.

‘Not curious enough’

The MPs report pointed to issues raised with the National Crime Agency about a part of the GFG Alliance, Wyelands Bank, which was discussed by the Treasury and the Department for Business, Energy & Industrial Strategy (BEIS), but not shared with the British. Business Bank “because they deemed it unrelated to the accreditation process despite being a significant Greensill financier with the GFG Alliance”.

MPs said the “lack of information sharing across the government” that hindered decision-making in response to the pandemic, allowed Greensill to access taxpayer-funded schemes, and thus is exposing taxpayers to the risk of £ 335m in case Greensill administrators demand payment.

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

In May the Serious Fraud Office opened an investigation with GFG into alleged fraudulent trade and money laundering, along with its funding arrangements with Lex Greensill’s company.

Conservative former prime minister David Cameron has contacted various ministers on behalf of Greensill Capital

The committee of MPs also said that in the government’s rush to encourage lenders to funnel emergency loans to businesses, “it has struck the wrong balance between making quick decisions and protecting taxpayer interest. “

“With more time and due diligence, the bank could reach a different decision on Greensill accreditation,” MPs said.

A British Business Bank spokesman said: “The National Audit Office decided in July 2021 that British Business Bank had appropriately applied a streamlined version of its established process when it recognized Greensill Capital (UK) Limited as a lender under of Covid-19 business support schemes.

“In the first year of the Covid-19 pandemic, British Business Bank said it recognized 171 lenders in three schemes to provide government-supported loans for more than 1.6m businesses.

“A less streamlined accreditation process means fewer lenders are accredited and fewer businesses will receive the critical finance they need during a pandemic,” he added.

“The NAO also found that to the bank’s credit that the monitoring and auditing processes after its accreditation picked up a potential issue quickly, as they were designed to do.”

The bank said its investigation into Greensill Capital’s potential breaches of the rules is ongoing, and guarantees to repay 80% of the defaulted loans remain suspended at the time of this investigation.

The committee said the bank should set “how it will better balance between speed of delivery and value for money in the future, and what trade-offs it is willing to accept”.

Greensill collapsed earlier this year after its insurer refused to renew cover for loans it makes.

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