Home Business NewsBusiness British Business Bank’s accreditation of Greensill Capital under scrutiny

British Business Bank’s accreditation of Greensill Capital under scrutiny

by LLB Editor
7th Jul 21 9:23 am

A National Audit Office review finds that Greensill Capital (UK) Limited was accredited by the British Business Bank (the Bank) as a lender under the government’s COVID-19 business support schemes using a streamlined version of the Bank’s established accreditation process in response to the policy requirement to provide prompt access to finance for businesses. The Bank subsequently became concerned that Greensill might have exceeded its lending limits and launched an investigation. Greensill denies making loans outside the scheme rules, and in March 2021 entered administration.1

In spring 2020, the government set up the Coronavirus Business Interruption Loan Scheme (CBILS) and Coronavirus Large Business Interruption Loans Scheme (CLBILS) to help businesses to access loans, overdrafts and other types of finance. Greensill was made an accredited lender under both schemes, and by October 2020 had loaned £418.5 million. The government guarantees 80% of the value of loans made through the schemes, meaning that if Greensill’s loans are not repaid by the borrowing companies, government could lose almost £335 million.

As the schemes were developed quickly to support businesses impacted by the pandemic, the Bank used a streamlined version of an existing accreditation process to authorise lenders, rather than establishing a new process.2 The Bank assessed a prospective lender against seven criteria, including its lending history, operational capacity, and legal structure. To speed up the process, the Bank relied on information provided by prospective lenders and did not perform detailed checks on it. The Bank placed greater reliance on post-accreditation audit checks to provide it with assurance that lenders are operating within scheme rules, rather than due diligence before.

On 19 April 2020, Greensill applied to lend up to £1 billion through CLBILS. The Bank applied its standard accreditation process, noting Greensill’s robust internal processes, limited losses in recent years and very low default rates across its lending facilities. However, it also noted that it had carried out limited due diligence on Greensill’s application, in keeping with how it treated other similar lenders.3 The Bank approved Greensill as a lender, but only up to £400 million, with a maximum loan limit of £50 million per borrower.

The Department for Business, Energy & Industrial Strategy (BEIS) was particularly interested in Greensill’s accreditation. BEIS told the NAO that it repeatedly requested updates on Greensill’s accreditation because it knew Greensill could potentially provide support to Liberty Steel, a major customer of Greensill which had approached BEIS for around £160 million to £180 million in financial support in early 2020.4 BEIS said that if Greensill was unlikely to be accredited, it wanted the Bank to prioritise this decision so alternative support options could be considered. The Bank demonstrated the independence of its decision-making by rejecting requests from BEIS to prioritise Greensill in the accreditation process.

By October 2020, Greensill had loaned £400 million under CLBILS, the maximum it was permitted to lend, and £18.5 million under CBILS. The government’s 80% guarantee means that in the event of Greensill’s loans not being repaid by the borrowing companies, taxpayers could lose almost £335 million. Lenders must comply with scheme rules to benefit from the guarantee.

On 2 October 2020, the Bank became concerned that Greensill’s lending may have contravened scheme rules on lending to groups. The Bank identified that Greensill had made seven loans totalling £350 million to Gupta Family Group Alliance borrowers. Greensill told the Bank on 6 October that it considered the loans to be compliant. The Bank escalated its concerns to HM Treasury on 7 October and BEIS on 9 October.

The Bank opened an investigation into Greensill’s lending on 12 October and suspended the government guarantees on 2 March 2021. Greensill, through its administrators, has denied making loans outside the scheme rules. It has also challenged the fairness of the Bank’s procedures, including claiming that the timeframe provided to Greensill to collate the necessary information to respond to the Bank’s allegations was procedurally unfair. The Bank’s investigation is ongoing, and the guarantees to Greensill’s loans remain suspended.

Greensill sought to access several other government business support schemes. This included, through its own lender, a £500 million loan supported by an Export Development Guarantee from UK Export Finance,5 and access to the Coronavirus Corporate Finance Facility through HM Treasury, both of which were rejected. Greensill Capital Management Company (UK) Limited, part of the wider Greensill group, received between £20,002 and £50,000 from HMRC as a part of the Coronavirus Job Retention Scheme in January and February 2021.

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