Lessons from Greensill Capital: accreditation to business support schemes – Report Summary

This is a House of Commons Committee report, with recommendations to government. The Government has two months to respond.

Author: Committee of Public Accounts

Related inquiry: Lessons from Greensill Capital

Date Published: 20 November 2021

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Summary

Up to £335 million of taxpayer money is at increased risk following the British Business Bank’s [hereafter referred to as the Bank] failure to conduct sufficient due diligence into Greensill Capital UK Limited when it applied to be a lender under the Bank’s business support schemes. In response to the COVID-19 pandemic, the government acted quickly to introduce business support schemes, including the Coronavirus Business Interruption Loan Scheme (CBILS) and the Coronavirus Large Business Interruption Loan Scheme (CLBILS). These schemes offered lenders a government-backed 80% guarantee should any of their borrowers default. In order to get money to businesses quickly, the Bank streamlined its lender accreditation process by performing limited due diligence upfront and placing greater reliance on audits after loans had been made. However, by prioritising speed of delivery, relying on a narrow evidence base, and taking information from lenders at face value, the Bank has created additional risks for the taxpayer. In the case of Greensill, the Bank was insufficiently curious about media reports questioning Greensill’s lending model, its over-exposure to borrowers, and ethical standards until problems were clear and hundreds of millions of taxpayers’ money left exposed.

A lack of information-sharing across government has once again hampered sound decision-making in government’s response to the pandemic and allowed Greensill access to taxpayer-funded schemes. The decision to accredit Greensill enabled it to make £418.5 million of loans to companies under the schemes. The Department for Business, Energy & Industrial Strategy showed considerable interest in Greensill’s accreditation, contacting the Bank on numerous occasions. The Bank conducted a review to examine whether third parties unduly influenced its decision to accredit Greensill, concluding that its independence was not compromised. We are therefore concerned that the Bank was “very surprised” when it noticed Greensill had issued seven loans totalling £350 million to borrowers within the Gupta Family Group (GFG) Alliance, appearing to contravene the £50 million lending limit to groups. The Bank launched an investigation into Greensill’s compliance with the scheme rules five months before it entered administration but more than a year later this is still ongoing, with no end date in sight.

Government has not yet identified the broader lessons it will take from its accreditation of Greensill or from its COVID-19 business support schemes. As we have repeatedly observed, it will be essential that these lessons are identified, and measures put in place to improve both its ability to respond to emergencies and its business-as-usual service delivery.