The British Business Bank demonstrated “woefully inadequate” due diligence in approving Greensill Capital to provide government-guaranteed loans through a coronavirus support program, a parliamentary committee has said.
A report from the House of Commons public accounts committee released on Saturday found that the state bank had accepted information from the now collapsed supply chain finance company “at face value”, while claiming that the British Business Bank “had not cast its net wide enough in gathering evidence on Greensill”.
The BBB has approved Greensill as a lender under its Coronavirus Large Business Interruption Loan (CLBILS) program, allowing the UK finance company to provide loans to government-backed companies of 80%.
Greensill then made eight loans totaling £ 400million to eight legal entities all linked to GFG Alliance, the metals group led by Sanjeev Gupta which is currently under investigation by the Serious Fraud Office. . The report noted that this appeared to ‘blatantly breach’ a £ 50million cap on loans the company could make to a single company.
“The British Business Bank only had to read the newspapers to be aware of the serious questions regarding Greensill’s lending model, its overexposure to borrowers and its ethical standards. millions of taxpayer dollars were already at risk, ”said Meg Hillier, Labor MP and chair of the public accounts committee.
“He said he was ‘very surprised’ to find out where these taxpayer-guaranteed loans had come under his supervision, in violation of his own lending and accreditation rules.”
Greensill Capital employed David Cameron as an adviser to the board of directors and the former prime minister led a broad lobbying effort to help his employer secure access to emergency coronavirus loan programs.
The findings of the public accounts committee follow a report by the National Audit Office in July which found that the UK government had shown “unusual” interest in Greensill’s loan program application.
The public accounts committee report found that when the BBB challenged Greensill for its excessive lending to the Gupta Metals Empire, the financial firm said it had received “political guides” as its support for the steel industry was welcome. The report notes that the Department of Business (BEIS) was “unable to explain the source of this perceived support.”
The committee also criticized “the government’s failure to effectively share intelligence” on Greensill and GFG between departments. He noted that although the Treasury informed BEIS that the National Crime Agency was investigating the Wyelands Bank in Gupta, the business department never forwarded this information to the BBB.
The BBB said the National Audit Office’s previous report determined that it had “appropriately applied a streamlined version of its established process” when approving Greensill to become a lender under the program.
“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,” added the BBB. “The Bank’s investigation into potential violations by Greensill Capital of the program rules for CLBILS is ongoing.”
The business department said: “The government 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.