According to the UK Parliament’s Public Accounts Committee report on Greensill published in November, checks from the British Business Bank to approve the company as a lender under the government’s COVID-19 support package were “woefully inadequate”.
This lack of scrutiny, curiosity and skepticism could end up costing taxpayers £335m (US$445m), MPs say.
When the pandemic caused a lockdown in March 2020, the UK government introduced business support to help businesses stay afloat. These schemes offered lenders a government-backed 80% guarantee against default by any of their borrowers through the British Business Bank, which was set up in 2012 to provide financial support to small and medium-sized businesses.
To get money for businesses fast, the bank has streamlined its lender accreditation process by performing limited due diligence at the outset and relying more on audits after loans are issued.
Deputies found the bank also relied on a narrow evidence base and took information from Greensill and other lenders at ‘face value’. He relied too heavily on the work of others to accredit Greensill, including auditor Saffery Champness, whose work is currently under investigation by the UK’s Financial Reporting Council.
The bank has previously acknowledged that “applying a less streamlined process could have caused it to question Greensill’s candidacy.”
The decision to accredit Greensill enabled it to provide £418.5 million (US$556 million) in business loans, of which £350 million went to the Gupta Family Group (GFG) Alliance, a group of companies owned by steel and mining magnate Sanjeev Gupta. . The GFG Alliance is being investigated by the UK Serious Fraud Office for alleged fraud, fraudulent trading, money laundering and its financial dealings with Greensill.
In the report, MPs found the bank was ‘insufficiently curious’ about media reports questioning Greensill’s lending model, its ethical standards and its overexposure to borrowers until the money had been transferred. .
For example, the bank did not verify which companies Greensill was offering to lend to, nor did it explore the concerns of other government departments and regulators about Greensill, including those evaluating it for access to credit. other programs.
The bank also failed to check with the company’s credit insurer – a vital mistake given the company’s collapse was due in large part to its insurers’ refusal to renew cover for the loans granted by the company.
MPs were particularly scathing about the bank’s admission she was ‘very surprised’ when she noted Greensill had made seven loans totaling £350million to borrowers within the GFG Alliance – six of which were issued on the same day – which appeared to “flagrantly contravene”. the £50m (US$66m) loan limit to groups.
The bank is unable to confirm how this money was used or in which country it was spent.
On October 12, the British Business Bank launched an investigation into Greensill’s compliance with the rules of the scheme. The investigation is ongoing.