The Department for Business, Energy and Industrial Strategy took an “unusual” level of interest in Greensill Capital’s application to become an accredited lender for an emergency Covid support scheme, the public spending watchdog has said.
Officials emailed the British Business Bank eight times seeking updates on its application, an investigation has found.
Early in the pandemic last year, the government set up the Coronavirus Large Business Interruption Loan Scheme and the Coronavirus Business Interruption Loan Scheme to support companies hit by coronavirus. The British Business Bank was tasked with administering the schemes.
Greensill Capital – the now-collapsed supply-chain finance firm at the centre of a lobbying scandal involving former prime minister David Cameron – was one of 27 companies that were ultimately accredited to administer CLBILS, the large-business scheme. It was one of only three non-bank lenders.
But while the British Business Bank treated Greensill’s application “like other similar applicants”, the National Audit Office said in a report today that BEIS had been “particularly interested in Greensill’s accreditation”.
“The department repeatedly requested updates on the accreditation process,” the NAO report said.
“It told us it did so as it knew Greensill could potentially provide support to Liberty Steel, and if Greensill were not accredited the department would have to consider what other types of support, if any, it would offer. The department made eight email enquiries of the bank over 19 weeks on the status of Greensill’s accreditation.”
Despite this interest – which the bank described to the NAO as “unusual” – a review by the bank’s legal team concluded that “external parties did not influence the bank’s accreditation of Greensill or the bank’s decision-making process”.
A BEIS spokesperson said there was "no suggestion whatsoever that BEIS ministers or officials sought to influence the British Business Bank's decision".
"All decisions taken by the bank are made independently of government in accordance with their usual procedures. It is perfectly normal – and right – that government gathers all relevant information when approached for taxpayer funds to support a business," they said.
Greensill went on to lend £400m under CLBILS – the maximum it was permitted – making it the fifth-largest CLBILS lender by value. It also lent £18.5m under CBILS.
It made several loans to companies within the Gupta Family Group Alliance – which owns Liberty Steel – through the CLBILS.
Accreditation process ‘streamlined’
The NAO found that the British Business Bank had conducted only “limited” due diligence on applications for accreditation, because of time pressures in administering the support schemes.
Because CBILS and CLBILS were put in place to offer rapid support to business hit by Covid-19, the bank, in consultation with BEIS and the Treasury, streamlined an existing accreditation process to use for the two schemes.
“The bank raised concerns with the department about the fast pace required for the delivery of these schemes,” the NAO report said.
“In the case of Greensill, this process did not identify the risks that materialised less than a year later when Greensill entered administration," NAO head Gareth Davies said in comments accompanying the report.
Allegeed breach 'could have been avoided'
The report shed light on an alleged breach of the large-business scheme’s lending rules, which Davies said “could have been avoided” had due diligence been more thorough.
Last autumn, the bank found Greensill may have broken the rules of the scheme by lending £350m to Gupta Family Group Alliance borrowers, “potentially exceeding its lending limits”.
The rules allowed loans of between £50m and £200m to a single business group, “subject to additional accreditation of the lender and only with the bank's pre-approval". However, Greensill was not accredited for this, the NAO said.
After Greensill told the bank it believed it had complied with the scheme rules, the bank escalated its concerns to the Treasury on 7 October and BEIS on 9 October, before opening an investigation into the finance firm’s lending.
“On 13 October 2020, the bank met with Greensill to outline its concerns and told Greensill it would not be allowed to make any more loans until the issues were resolved. During the meeting, Greensill said it had received ‘political steers’ that its support for the steel industry was welcome,” the NAO report said.
In March, the bank suspended the government's guarantee obligations to Greensill.
“It is to the bank’s credit that it quickly picked up the loans allegedly in breach of the scheme rules, but had it applied a different accreditation process it is possible that this situation could have been avoided.”
Bank chief executive Catherine Lewis La Torre said: "The British Business Bank acknowledges... applying a less streamlined process might have led the bank to further question Greensill's application.
"A less streamlined accreditation process would, however, have been lengthier, meaning that fewer lenders may have been accredited, and fewer businesses would have received the critical finance they needed."