The UK government applied an “unusual” level of pressure to ensure that Greensill Capital became an accredited lender under the government’s Covid lending scheme, according to Whitehall spending watcher.
The State Audit Office concluded in a report on the now collapsed supply chain finance company that the business department (BEIS) “repeatedly requested updates on the accreditation process” before the state-owned British Business Bank approved Greensill status.
The supervisor also found that the BBB, while seeking loans during the Covid-19 crisis, did not conduct detailed screening of lenders seeking accreditation.
“Unfortunately, it’s clear that some of this mess could have been avoided if Greensill had been carefully worked out in advance,” said Meg Hillier, a Labor MP and chair of the House of Commons State Accounts Committee. “There are important lessons for the government.”
The lender used the coronavirus-related business interruption loan scheme to provide eight loans totaling £ 400m to eight corporate entities affiliated with the GFG Alliance, a metallurgical group run by Sanjeev Gupta that is currently being investigated by the Serious Fraud Authority.
CLBILS regulations prohibited lending of more than £ 50 million through any financial company in the supply chain of any single company.
The NAO report first publicly confirmed the names of eight borrowers. reported according to the Financial Times. Theft disclosed In October 2020, several Gupta-related companies raised Covid loans through Greensill.
In March of this year, a commercial bank suspended the government guarantee for Greensill loans due to suspicions of violating the terms of the program.
Greensill, which crashed the same month, hired former Prime Minister David Cameron as a senior advisor. He lobbied dignitaries, including Chancellor Rishi Sunak, to try to change the rules governing CLBILS and the Bank of England’s separate Covid lending scheme in early 2020.
Although Cameron’s efforts were unsuccessful, Greensill eventually gained access to CLBILS for the benefit of the Gupta empire.
The NAO report showed that BEIS sent eight electronic inquiries about Greensill to the BBB over a period of 19 weeks. It also pushed the state bank to see if Greensill could be accredited to provide a loan of up to £ 200m per borrower, rather than a £ 50m limit.
The watchdog said the department told him that its interest was motivated “not specifically by Greensill, but by its ties to the steel industry” to ensure support for Liberty Steel, which is part of GFG.
BEIS told the NAO that they considered his approach “informal”, but they surprised the BBB.
“The bank informed us that the department sometimes requested information on the accreditation of specific lenders, including lenders of other steel companies, but described this level of institutional interest as ‘unusual’,” the NAO said in a statement.
BBB told BEIS that it does not want to prioritize Greensill at the expense of accrediting other lenders.
He rejected a request to lift the £ 50 million cap “due to Greensill’s regulatory status.” The lender, founded by Australian tycoon Lex Greensill, was not controlled by UK banking regulators.
More broadly, the NAO found that the BBB relied on information provided by potential lenders and on “post-accreditation audits”. … … not a preliminary check. “
The BBB took the accuracy of the information provided by Greensill at face value: “It did not check in detail to whom Greensill will lend,” the NAO said in a statement.
Catherine Lewis La Torre, chief executive of the BBB, welcomed the NAO’s comments that the bank had demonstrated “decision-making independence” and that it quickly took out loans that “allegedly violated the rules of the scheme.”
The BBB has granted 170 credit accreditations under three different Covid credit schemes, resulting in more than £ 75 billion in loans to more than 1.6 million businesses.