Greensill Covid loan accreditation in line with ‘streamlined’ approval process
The decision to grant collapsed Greensill Capital the ability to hand out Covid loans was in line with the approved accreditation process, but a stricter set of criteria could have identified the firm’s issues, a new report has found.
The National Audit Office (NAO) also said that the British Business Bank (BBB), which administers the scheme, had demonstrated its ‘independence’ by rejecting government requests to prioritise Greensill’s application.
According to the report, Greensill lobbied the BBB to be allowed to lend up to £1bn under the Coronavirus Large Business Interruption Loans Scheme (CLBILS).
Officials at the bank agreed to let the supply chain finance specialist permitted to loan £400m, with a maximum loan limit of £50m per borrower.
As the government had agreed to cover 80 per cent of the loans under the scheme, such an allowance could have cost it £335m.
According to the NAO, the BBB carried out limited due diligence on Greensill when assessing its application, but that was in line with how it treated other potential lenders, given the need to get finance to struggling firms fast.
At the time, it noted Greensill’s ‘robust internal processes, limited losses in recent years and very low default rates across its lending facilities”.
But in October, the bank opened an investigation into Greensill when it revealed that it had loaned £350m to businesses under Sanjeev Gupta’s GFG Alliance, one of the boutique financier’s key clients.
Although Greensill argued that the loans were complaint with the programme, the BBB informed the Treasury and BEIS of its investigation shortly thereafter.
In March 2021, it suspended the loans, with Greensill going into administration soon after.
Meg Hillier MP, chair of the Committee of Public Accounts: “Today’s NAO report brings some much-needed clarity to this important issue – establishing the facts in support of the ongoing inquiries.
“Sadly, it is clear that some of this mess could have been avoided with more thorough due diligence on Greensill upfront.
“As with many of the decisions made during the pandemic, there are important lessons for the government about the trade-off between speed and accuracy in its emergency response.”
BBB ignored BEIS lobbying
The report also showed that BBB officials had resisted multiple requests from officials at BEIS to speed up the approval of Greensill’s application.
As reported last week in the Guardian, BEIS officials were eager for Greensill to be approved because of its pre-existing relationship with GFG subsidiary Liberty Steel, which had approved the government for £160m to £180m in financial support in early 2020.
Officials sent eight emails to the BBB asking for updates on the issue, raising yet more concerns about Greensill’s clout across government.
The firm’s collapse has already triggered a major lobbying scandal involving former PM David Cameron and a number of high level Civil Servants.
But the report concluded that the BBB had “demonstrated the independence of its decision-making by rejecting requests from BEIS to prioritise Greensill in the accreditation process”.