Select committee inquiry
Lessons from Greensill Capital
Closed
What the inquiry looked at
“In response to the COVID-19 pandemic the government launched a series of schemes providing financial support to businesses of all sizes. Of these, the Coronavirus Large Business Interruption Loan Scheme (CLBILS) provided support to the largest businesses—those with a minimum turnover of £45 million. Commercial lenders (for example, banks, building societies and peer to peer lenders) provided financial support directly to businesses. Borrowers are expected to repay the debt in full and government provides a guarantee to the lenders. The British Business Bank (BBB), acting as scheme administrator on behalf of the Department for Business, Energy and Industrial Strategy, authorised lenders to provide financial support under CLBILS following an accreditation process. BBB authorised Greensill Capital to issue financial support in June 2020. Greensill Capital filed for insolvency on 8th March 2021. Drawing on Committee’s previous work and the National Audit Office’s report on Greensill Capital , the inquiry will consider the operation of the Covid 19 financial support packages for business, in particular Greensill Capital’s involvement in the schemes including the accreditation process, and any post-accreditation monitoring of Greensill Capital’s activities. The Committee will question senior officials at the Treasury and Department for Business, and the chief executive of the British Business Bank. If you have evidence on these issues please submit it here by 6pm on Tuesday 20 July 2021.”
The committee's words, from the inquiry page on parliament.uk ↗.
What it found
In the committee's words, from the summary of Twenty-Sixth Report - Lessons from Greensill Capital: accreditation to business support schemes ↗
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.
What the government said
The government responded on 21 January 2022. The deadline was 20 January 2022.
Summary written by Accountability Index from the government's response.
The government states that it "agrees with the Committee's recommendation" on each of the report's recommendations set out in this response, and gives implementation dates or says the action is already done.
- On accreditation, the Bank will write to the Committee "by the end of February 2022", detailing the processes reviewed and adjusted before the Recovery Loan Scheme, and will "continue to keep its accreditation process under review".
- On the Greensill investigation, the Bank's "primary concern is that a decision is taken upon a full and informed picture, rather than that a quick resolution is reached"; the outcome is "expected to be in the early months of 2022".
- On sponsor enquiries to arms-length bodies, the government "will aim to publish the new guidance in 2022" through a Sponsorship Code of Good Practice, and the Department will write to the Committee on its considerations on operational independence.
- On lessons learned, the government "will aim to produce a lessons-learned report by Summer 2022", drawing on early insights from a multi-year evaluation, with evaluation reports published "in due course".
Read the government's response ↗ Read the report ↗ Report an error
How the inquiry ran
Each dot is a dated item listed on this page, from 13 May 2021 to 9 March 2022. The dashed mark is the deadline Parliament records for the government's response.
- Oral evidence 2 sessions
- Report 20 Nov 2021
- Government response 21 Jan 2022
- Correspondence 4 letters
What it recommended 9 recommendations · 19 conclusions
2The Department and the Bank struck the wrong balance between making decisions quickly and protecting...
Recommended (the committee's words)
The Department and the Bank struck the wrong balance between making decisions quickly and protecting taxpayer interests. We have previously found that the need to work at speed in responding to the pandemic has in some instances resulted in increased risk and potentially exposed the taxpayer to huge losses. The Bank’s approach to assurance consists of: the initial accreditation of lenders; post-lending assurance; and legal and contractual protections within the scheme guarantee agreement. The Bank’s decision to follow a streamlined accreditation process when assessing Greensill’s application—as with other non-bank lenders— placed greater reliance on post-lending audits and legal protections rather than performing detailed upfront due diligence. The Bank asserts that it adopted a tiered approach to accreditation, which differentiated between regulated banks and non-bank lenders. For example, regulated banks and lenders with which the Bank had an existing relationship underwent an accelerated process. The Bank accepts that delivering at speed has exposed it to risk, but it considers the interests of the taxpayer to be very well protected through its contractual arrangements with each lender. While the Bank has legal protection in preventing a guarantee being called if it believes scheme rules have not been followed, this is by no means a certain outcome—Greensill’s administrators have stated their belief that Greensill is compliant with the scheme rules. With more time and due diligence, the Bank might have reached a different decision on Greensill’s accreditation. 6 Lessons from Greensill Capital: accreditation to business support schemes Recommendation: The Bank should write to the Committee by the end of the year setting out how it will better balance between speed of delivery and value for money in future and what trade-offs it is prepared to accept. The response should detail how the Bank will identify these trade-offs early, perform scenario analysis of potentia
3The Bank’s approach to due diligence in accrediting Greensill was woefully inadequate.
Recommended (the committee's words)
The Bank’s approach to due diligence in accrediting Greensill was woefully inadequate. The Bank took comfort in Greensill having raised significant funding from global investors and its activities in managing billions of pounds in lending. In doing so, the Bank has placed too much reliance on the work of others in accrediting Greensill, including Greensill’s auditors, whose work is currently being investigated by the Financial Reporting Council. The Bank has accepted much of the information provided by Greensill in its application at face value, including its statements of who Greensill would lend to. It seems clear that had the Bank been more curious and sceptical in its accreditation process, Greensill’s application would have raised many more questions. Greensill’s default rates and exposure to key clients have both been the subject of press reports prior to, and during, Greensill’s accreditation, yet the Bank did not cast its net widely enough in gathering evidence on Greensill. For example, the Bank did not make enquiries of the companies Greensill proposed to lend to under CLBILS. The Bank also did not explore what other government departments and regulators knew about Greensill – including those who were also assessing it for access to other schemes. Neither did it make any enquiries of Greensill’s credit insurers. While there was no proven fraud at the point of accreditation, several parties subsequently raised concerns about Greensill. Ultimately, the Bank’s inadequate due diligence has put public money at risk. Recommendation: The Bank should, by the end of February 2022, review its accreditation process, particularly for non-bank lenders and write to us with the results. The review should include the Bank’s approach to: • The principles applied to streamlining an accreditation process, and how post-accreditation checks seek to deal with any risks that arise as a result; • challenging and verifying information lenders provide regarding who they plan to len
4The Bank has been insufficiently curious when identifying where money lent through the schemes, including...
Recommended (the committee's words)
The Bank has been insufficiently curious when identifying where money lent through the schemes, including by Greensill, has ultimately gone. Companies have borrowed around £30 billion under CBILS and CLBILS. The schemes’ rules require these funds be used to support business activity in the UK. However, the Bank does not track where the money it has lent as part of the schemes has gone and cannot guarantee the money has not been offshored. The Bank is unable to confirm how the £350 million Greensill loaned to GFG Alliance companies was used, or in Lessons from Greensill Capital: accreditation to business support schemes 7 which country the money was spent. The Bank believes the money has gone into a ‘central treasury function’ within the GFG Alliance, although it does not know where this is based. The Bank is relying on the work of Greensill’s administrators to identify where the loans have gone and, by extension, where the taxpayers’ exposure potentially lies. The Bank has published summary data showing the geographical split of where some of the money issued through its COVID-19 loan schemes has gone. However, this did not include regional and sectoral data for CLBILS owing to data protection and commercial considerations. Without knowing where the money has gone it will be impossible to say whether the objectives of the schemes to support UK businesses has been fully met, or whether taxpayers may be exposed to risks in the future. Recommendation: As a matter of urgency, the Bank should inform the Committee how it ensures that money lent under CBILS and CLBILS supports businesses in the UK and the British economy, how it monitors this in practice, and what action it would take if it discovered funds lent under these schemes have been offshored.
5We are concerned that the Bank’s investigation into Greensill has progressed much more slowly than...
Recommended (the committee's words)
We are concerned that the Bank’s investigation into Greensill has progressed much more slowly than we would expect given the seriousness of the potential breach. The Bank launched an investigation into Greensill on 12 October 2020, 10 days after discovering Greensill had issued seven CLBILS loans, totalling £350 million, to companies associated with the GFG Alliance. The Bank accepts that it was very surprised by these loans because the scheme rules prohibit lending to groups above £50 million. This is despite press reports in the run up to September 2020 questioning the relationship between Greensill and the GFG Alliance, culminating in the German regulator, BaFin, raising similar concerns. The Bank told us that it had explicitly communicated the group lending rules to Greensill, explaining that the lending limit would be £50 million for the whole group, not per subsidiary.1 In October 2020 the Bank instructed Ernst & Young (EY) to examine all eight of Greensill’s CLBILS loans. This work was completed by March 2021 with the Bank provisionally concluding that Greensill was in breach of the scheme rules. The Bank informed Greensill of its provisional findings and that it was suspending the government guarantee for these loans on 2 March 2021, five months after the loans were made. While the Bank initially acted quickly when it suspected Greensill had breached the scheme rules, the investigation is still ongoing, over a year later. The Department and the Bank assert that there is no real benefit in rushing this process in order to ensure they could not be challenged on any of the steps that were taken. Until this investigation concludes, uncertainty over the risk to taxpayer’s money remains, with the ultimate decision on whether Greensill breached the rules likely to be made in the courts. Recommendation: The Bank should complete its investigation as soon as possible and inform the Committee, as a matter of urgency, when it expects to do so. It should write to the Com
6The Department’s enquiries of the Bank during Greensill’s accreditation created a damaging perception of interference,...
Recommended (the committee's words)
The Department’s enquiries of the Bank during Greensill’s accreditation created a damaging perception of interference, though the Bank asserts that this did not affect its judgement. The Department had eight email exchanges with the Bank between April and September 2020 requesting updates on Greensill’s accreditation to CLBILS and whether it would be allowed to lend up to £200 million. The Department’s interest in Greensill’s accreditation was based on the potential for the scheme to support Liberty Steel, part of the GFG Alliance and a major Greensill customer. The Bank describes this level of interest as “unusual”. Furthermore, when challenged on its lending to the GFG Alliance, Greensill told the Bank that it had received “political steers” that its support for the steel industry was welcome. The Department is unable to explain the source of this perceived support and has confirmed with all its ministers that no political cover for Greensill has been provided. On 30 April 2021, the Bank launched an internal review to assess whether third parties sought to influence it during the accreditation of Greensill and, if so, the outcome of that influence. The purpose of the review was to find out whether anybody attempted to exert influence over the Bank, not just whether these attempts were successful or not. The Bank’s review has concluded that its independence was not compromised. Recommendation: Alongside its Treasury Minute response, the Department should write to the Committee within three months setting out the principles it will apply to future correspondence with the Bank on matters for which the Bank is operationally independent, to minimise any future perception of influence. The Treasury should, jointly with the Cabinet Office, set out cross-government principles to create a more routine and transparent way of sponsoring bodies making enquiries of its arms-length bodies.
7Government has not yet identified the lessons it will take from its accreditation of Greensill...
Recommended (the committee's words)
Government has not yet identified the lessons it will take from its accreditation of Greensill or from its COVID-19 business support schemes. Our work over the last 18 months has shown that the scale and nature of the COVID-19 pandemic and the government response are unprecedented in recent history and there is much that government can learn to improve both its ability to respond to emergencies and its business-as-usual service delivery. The Bank’s accreditation of Greensill has highlighted wider lessons about Government’s response to the pandemic, including the need to balance delivering at speed with managing risk, which we have previously reported on. The Bank intends to evaluate its COVID-19 business support schemes to determine whether there are lessons it can learn. It accepts that discussions with international counterparts that have been delivering similar schemes, such as development banks, would be a fruitful theme. The Treasury and the Department similarly intend to review the results of the various inquiries on Greensill’s interaction with Government before drawing any conclusions. However, Government is yet to set out its plans for identifying and applying the lessons in order Lessons from Greensill Capital: accreditation to business support schemes 9 to prevent another situation like Greensill from occurring and improve its ability to respond to future emergencies and economic shocks. We are concerned that if Government does not swiftly formalise this lessons-learned exercise, or conduct it soon enough, it risks losing institutional memory and the necessary lessons will not be learned. Recommendation: The Treasury, the Department and the Bank should jointly work to identify the lessons that need to be learned from its COVID-19 business support schemes and Greensill’s accreditation in particular. By July 2022 they should publish a full lessons-learned report on these schemes, outlining how each lesson will be implemented. This will enable it to be bette
1On the basis of a report by the Comptroller and Auditor General, we took evidence...
Concluded (the committee's words)
On the basis of a report by the Comptroller and Auditor General, we took evidence from HM Treasury (the Treasury), the Department for Business, Energy & Industrial Strategy (the Department), and the British Business Bank (the Bank) about the involvement of Greensill Capital UK Limited (Greensill) in COVID-19 business support schemes.2
8The Bank accredited Greensill to lend under both CBILS and CLBILS.
Concluded (the committee's words)
The Bank accredited Greensill to lend under both CBILS and CLBILS. As Greensill was not PRA regulated nor did it have a pre-existing relationship with the Bank, it was initially 6 Qq 17, 19; C&AG’s Report para 2, 2.4 7 C&AG’s Report, para 2.6, Figure 9 8 Q 14 9 Committee of Public Accounts, Covid-19: Bounce Back Loan Scheme, 33rd Report of Session 2019–21, HC 687, December 2020 10 Q 19 11 Q 18; C&AG’s Report, para 10 12 Q 29; C&AG’s Report, para 2.6 13 Q 29, C&AG’s Report, paras 2.2, 2.6 12 Lessons from Greensill Capital: accreditation to business support schemes subjected to the Bank’s standard accreditation process, with subsequent applications completed through the accelerated process. The Bank undertook limited due diligence on Greensill’s application—as with other non-bank lenders—accepting key information at face value. The Bank did carry out some cross-referencing of Greensill’s application with its 2018 audited accounts, but important figures, such as Greensill’s stated £120 billion of financing in 2019, could not be verified using publicly available information. The Bank told the NAO that the purpose of its due diligence was not to conduct a detailed assessment of Greensill’s financial position, but to confirm that lenders could reliably deliver money to borrowers, in line with government’s objectives for the scheme.14 We therefore asked the Bank what it had done to satisfy itself that the information provided by Greensill was accurate. The Bank told us that it “would imagine” this £120 billion figure was accurate, adding that while there was no single source to verify it, there was “plenty of evidence” that Greensill had “run very significant debt investment programmes for significant global investors across the world”.15 It explained that while it did not have a commercial relationship with Greensill prior to CBILS and CLBILS, it was aware of the organisation and “knew them as a leading player in the UK finance market” and “had observed their work in the
9We asked the Bank how much weight it had placed on the work of others,...
Concluded (the committee's words)
We asked the Bank how much weight it had placed on the work of others, such as Greensill’s auditors, Saffery Champness, in its decision to accredit Greensill. The Bank told us that the auditor’s opinion about the financial health of Greensill was considered as part of the accreditation process and that it placed reliance on the audited accounts.17 In June 2021, it was reported that the Financial Reporting Council was investigating Saffery Champness in relation to its audit of Greensill’s financial statements for the year ended 31 December 2019.18 We asked whether, in hindsight, the Bank should have been more sceptical in relying on assurances from Saffery Champness. The Bank told us that it considered it was “within our rights to rely on that audit” but recognised that, with a more sceptical approach, it might have come to a different outcome.19 We also asked the Bank whether it challenged Greensill on who it planned to lend to under CLBILS. The Bank confirmed that while it would not perform a credit assessment of the underlying borrowers as part of the accreditation process, it did discuss Greensill’s lending pipeline, which “appeared an appropriate pipeline”.20 However, prior to its initial accreditation, the Bank did not request the names of the individual borrowers Greensill planned to lend to. In its letter to us after our evidence session, the Bank told us that it subsequently requested this information but did not perform any due diligence on Greensill’s potential borrowers. The Bank also explained that this was the responsibility of Greensill.21
10We asked the Bank why it had accredited Greensill despite several press reports highlighting it...
Concluded (the committee's words)
We asked the Bank why it had accredited Greensill despite several press reports highlighting it had a string of its clients default on their debt, potentially damaging Greensill. The Bank told us that it discussed the losses with Greensill and their potential impact on its financial position, which had provided “what appeared to be a plausible answer”.22 It explained that other lenders had also taken similar losses on the same 14 C&AG’s Report, paras 11, 1.13, 2.15 15 Q 33 16 Q 33 17 Qq 93–94 18 Qq 95, 121–122 19 Q 95 20 Q 39 21 Letter from the Chief Executive of the British Business Bank to the Chair, 7 September 2021 22 Q 88 Lessons from Greensill Capital: accreditation to business support schemes 13 company, so it did not feel like a Greensill-specific issue. The Bank further explained that these defaults related to problems with the underlying borrowers rather than a systemic issue with Greensill making wrong lending decisions.23 We also questioned the Bank on the risks that the German Regulator, BaFin, raised regarding Greensill’s exposure to companies within the GFG Alliance—a concern that was also raised in several press reports prior to September 2020.24 The Bank told us that the Treasury had made it aware that there were growing regulatory concerns by November or December 2020, but this was “perhaps a little late” as Greensill had made its CLBILS loans by the end of September 2020.25 The Bank also confirmed that it had been unaware that Greensill’s insurance provider, Tokio Marine, were investigating Greensill.26 We asked the Bank whether looking back with hindsight, it would have done anything differently. The Bank told us it did not think that it had missed anything based on the information available at the time Greensill was accredited, while acknowledging that “with more time and a different process” it might have uncovered something different.27 The Department’s interest in Greensill’s accreditation
11The NAO found that the Bank treated Greensill’s application like other similar applicants, but that...
Concluded (the committee's words)
The NAO found that the Bank treated Greensill’s application like other similar applicants, but that the Department was particularly interested in Greensill’s accreditation. The Bank applied the same accreditation and due diligence process to Greensill as it did to the two other non-bank lenders that it considered. Between April and September 2020, the Department had eight email exchanges with the Bank requesting updates on the status of Greensill’s accreditation, and whether it might be accredited to lend up to £200 million per borrower.28 The Department told us that these emails were “not putting pressure” on the Bank to accredit Greensill but rather asking the Bank “when it will accredit or not accredit Greensill”.29 The Department explained that these emails took place between “relatively low level” officials rather than ministers or senior civil servants.30
12The Department told us that it had requested updates on when a decision would be...
Concluded (the committee's words)
The Department told us that it had requested updates on when a decision would be made about accrediting Greensill so that it could decide whether it needed to create a “separate bespoke solution … [if] the process was ultimately going to end in a no”.31 It explained that its interest was because Greensill was a major financier to Liberty Steel which is part of the GFG Alliance and the UK’s third-largest steel manufacturer.32 The Department told us that its steel team was having “very active live discussions” with Liberty Steel, together with a whole range of other steel companies, as Liberty Steel was experiencing financial difficulties caused by the COVID-19 pandemic. The Department explained that it was working out “what the different paths might be to provide Government support to those companies”, and that if the Bank was to accredit Greensill, the Department would not need to run a separate process to develop bespoke support, as Liberty Steel could access loans via CLBILS.33 23 Qq 15, 88 24 C&AG’s Report, Figure 13 25 Q 45 26 Q41 27 Q 18 28 C&AG’s Report, para 12 29 Qq 20–21 30 Qq 24, 70 31 Q 21 32 C&AG’s Report, para 8 33 Q 20 14 Lessons from Greensill Capital: accreditation to business support schemes
13The NAO found that, when challenged on its loans to borrowers within the GFG Alliance...
Concluded (the committee's words)
The NAO found that, when challenged on its loans to borrowers within the GFG Alliance group, Greensill told the Bank that it had received “political steers” that its support for the steel industry was welcomed.34 We asked the Department what Greensill had meant by receiving political steers. The Department told us it did not know, and that it had not been able to find evidence that any minister in the Department had provided “any level of political cover for Greensill’s actions under the scheme”.35 It explained that it had explicitly asked all its ministers whether any level of political cover had been provided to Greensill. It noted that ministers were keen to see the steel industry supported, and so the principle that there were lenders that would use the schemes to make money available to the steel industry had political and official level support. But it told us that there was “absolutely no evidence” that any assurance had been given around the idea that any lender would abuse scheme rules in order to do so.36
14We asked the Bank whether it considered the Department’s questions about Greensill’s accreditation as the...
Concluded (the committee's words)
We asked the Bank whether it considered the Department’s questions about Greensill’s accreditation as the Department encouraging the approval of Greensill’s application. The Bank told us that it had considered the level of interest from the Department as “unusual”, but that it considered it “understandable that the Department in charge of looking after business would ask how various things were progressing”.37 It explained that it wanted to make sure that its processes had not been “interfered with” and while this was “unlikely”, it was something the Bank wanted to test.38 On 30 April 2021, the Bank launched an internal review to test if there had been any external influence that had impacted its decision to accredit Greensill, and whether its independence had been undermined. The Bank told us that the review had found no attempts to undermine the Bank’s independence and while the level of interest from the Department was “unusual”, it “was very confident that it did not have an impact” on its decision to accredit Greensill.39 The purpose of the review was to find out whether anyone attempted to exert influence over the Bank, not just whether any attempts were successful or not. The Bank told us the review concluded that there were not attempts to undermine its independence.40 Other parts of government Greensill applied to for support
15In early 2020, Greensill approached a number of government departments seeking involvement in various business...
Recommended (the committee's words)
In early 2020, Greensill approached a number of government departments seeking involvement in various business support schemes.41 Greensill approached the Treasury and the Bank of England to access the Covid Corporate Finance Facility (CCFF) and was rejected as it was ineligible.42 The Treasury Select Committee covered Greensill’s application to the CCFF in detail in its report published in July 2021.43 Greensill also approached UK Export Finance (UKEF) through a lender, seeking a £500 million loan supported by an Export Development Guarantee. UKEF began discussions with Greensill in late March 2020 and rejected this application in June 2020. UKEF also rejected a revised application to the same scheme in September 2020. UKEF rejected Greensill’s application as it did 34 C&AG’s Report, para 3.9 35 Q 69 36 Q 69 37 Qq 20, 71–72 38 Q 22 39 Qq 22–24, 110; C&AG’s Report, para 2.27 40 Qq 100, 10–112; C&AG’s Report, para 2.27 41 C&AG’s Report, para 1.14–1.15 42 Treasury Select Committee, Lessons from Greensill Capital: correspondence, May 2021 43 Treasury Select Committee, Lessons from Greensill Capital, Sixth Report of Session 2021–22, HC 151, July 2021 Lessons from Greensill Capital: accreditation to business support schemes 15 not feel it was sufficiently aligned with the policy intent of the guarantee. Furthermore, UKEF’s due diligence had identified media reports highlighting concerns relating to Greensill; including its governance and the level of exposure to some of its customers.44
16We were concerned that Greensill had approached various parts of government looking for financial support,...
Concluded (the committee's words)
We were concerned that Greensill had approached various parts of government looking for financial support, with different decision-makers arriving at conclusions in isolation and without engaging with officials in other departments. For example, the Bank told us that it was not in touch with UKEF during its accreditation of Greensill, but that it had “looked at … and questioned” the same media reports that UKEF had identified during its due diligence.45 The Bank told us the fact that it and UKEF reached different conclusions from the same media reports reflected the different eligibility criteria of the two schemes.46 The Treasury explained that because each of the business support schemes that Greensill applied to were designed with “different objectives in mind and with different rules” and eligibility criteria, it was not surprised that different conclusions were reached.47
17In May 2020, the Bank of England shared information with the Treasury that it had...
Concluded (the committee's words)
In May 2020, the Bank of England shared information with the Treasury that it had raised concerns with the National Crime Agency about Wyelands Bank. Wyelands Bank is a part of the GFG Alliance which was a significant Greensill client.48 The Treasury told us that information about a possible criminal investigation was “among the most tightly restricted information” in order to avoid compromising an ongoing investigation and that it was unable to share this information. It asserted that, as the information was about Wyelands bank, not Greensill, and that the former was not applying to the Bank for accreditation, it considered this “a completely separate entity and a separate exercise”.49 It explained that the Bank of England wrote to it on 15 May 2020 with “more detailed, specific information” and that it had subsequently shared this information with the Department on 19 May 2020 as it knew that the Department was in discussion with Liberty Steel, another part of the GFG Alliance, regarding a request for direct government support, and it judged that the information was relevant to those discussions.50 However, this information was not shared with the Bank, as both the Treasury and the Department deemed it not relevant to the accreditation of Greensill. The Treasury explained that it treats sensitive information about companies carefully, in order to avoid adverse impact from its inadvertent disclosure.51 We noted that the sharing of information is a critical part of protecting taxpayers’ money. We therefore asked the Treasury if, given the legislation covering the sharing of information, there was any information that it could have shared that would have been helpful to the Bank or elsewhere in government. The Treasury told us it believed that it had shared all the information it should have.52 44 C&AG’s Report, para 1.15 45 Q 139 46 Q 139 47 Q 1 48 Q 3, Treasury Committee, Lessons from Greensill Capital, Sixth Report of Session 2021–22, HC 151, 14 July 2021 49 Q 3 5
18Greensill lent a total of £418.5 million under the government’s COVID-19 business support schemes between...
Concluded (the committee's words)
Greensill lent a total of £418.5 million under the government’s COVID-19 business support schemes between July and October 2020. Of this, Greensill lent £400 million under CLBILS, the maximum amount it was authorised to lend, through eight loans of £50 million. This made Greensill the fifth largest lender under this scheme. Under CBILS, Greensill made four loans worth £18.5 million.53
19On 12 October 2020, the Bank launched an investigation into Greensill’s compliance with the CLBILS...
Concluded (the committee's words)
On 12 October 2020, the Bank launched an investigation into Greensill’s compliance with the CLBILS scheme rules. This was 10 days after the Bank first noticed that Greensill had made six CLBILS loans on 30 September to companies associated with the GFG Alliance; in addition to a loan made in July to SIMEC International (UK) Limited, another GFG Alliance company.54 The Bank told us that it was “very surprised” when it realised that £350 million of Greensill’s £400 million lending allocation had gone to GFG Alliance companies, as the Bank had set the limit for group lending at £50 million. Moreover, the Bank told us that it had explicitly communicated the group lending rules to Greensill, using British Steel as an example to explain that the lending limit would be £50 million for the whole group, not per subsidiary.55
20The Bank told us that it had acted immediately to protect the taxpayers’ position by...
Concluded (the committee's words)
The Bank told us that it had acted immediately to protect the taxpayers’ position by preventing Greensill from making any further loans under the schemes.56 The Bank engaged Ernst & Young (EY) between October 2020 and March 2021 to examine all eight of Greensill’s CLBILS loans.57 The Bank explained that its investigation considered both Greensill’s compliance with the scheme rules around lending to groups and more broadly “whether they were a prudent lender, whether they had fulfilled the standard of care, whether they had acted in good faith and whether they had brought the scheme into disrepute”. Following EY’s report, the Bank provisionally concluded that Greensill was in breach of the scheme rules. The Bank informed Greensill of its decision on 2 March 2021 via a ‘Letter of Concern’.58
21In the Letter of Concern, the Bank outlined what it considered to be breaches of...
Concluded (the committee's words)
In the Letter of Concern, the Bank outlined what it considered to be breaches of the guarantee agreement. In the Letter, the Bank also suspended the guarantee while the investigation was ongoing and invited representations from Greensill.59 We asked the Bank why it had taken so long between initiating the investigation in October 2020 and issuing the first Letter of Concern in March 2021. In response, the Bank said that it was a “very complex situation” and that it wanted to ensure it “followed the process properly” before putting forward its concerns formally. The Bank acknowledged that it was possible it could have issued the Letter of Concern sooner, but it thought this was “probably unadvisable”.60 The Bank and the Department told us that they felt there was “no real 53 C&AG’s Report, paras 13, 3.4, figure 8 54 C&AG’s Report, paras 3.5, 3.9 55 Qq 75, 77–78, 90, 133, 136 56 Q 47 57 C&AG’s Report, para 3.9 58 Q 49 59 C&AG’s Report, para 3.10 60 Qq 46–47 Lessons from Greensill Capital: accreditation to business support schemes 17 benefit from rushing the process” as they wanted to be sure the decision to suspend the guarantee would not be challenged.61 Greensill’s administrators have indicated that their view is that the loans were compliant with the scheme rules, including those relating to group lending, and any decision to revoke the guarantee would constitute a breach of the guarantee agreement and Greensill would reserve the right to seek damages.62
22The Bank confirmed that the investigation was still ongoing as it was awaiting a formal...
Recommended (the committee's words)
The Bank confirmed that the investigation was still ongoing as it was awaiting a formal response from Greensill’s joint administrators. The Bank explained that it had agreed to extend the deadline for Greensill’s response to August 2021 because it wanted to receive a “fulsome answer” to its detailed set of concerns.63 When asked why Greensill appeared to have a completely different interpretation of the scheme rules, the Bank told us that “there is always scope for a lawyer to interpret different rules and different definitions differently”.64 While the investigation is ongoing, the guarantee remains suspended until a decision is reached.65 We asked when the Bank envisaged being able to make a final decision about the suspension of the guarantee. The Bank told us that it would not be in a position to answer this until it had received a response from Greensill’s administrators, and did not provide a timeframe for how long it thought this might take.66 The Department told us that if a future call on the guarantee was made following a default from any of Greensill’s borrowers, it was important that government was clear on its rationale for suspending the guarantee. It noted that the decision on whether Greensill breached the scheme rules would ultimately be decided in a court of law.67 Lending under CLBILS and the use of funds
23In total, under CBILS and CLBILS, lenders have issued more than 110,000 loans worth around...
Concluded (the committee's words)
In total, under CBILS and CLBILS, lenders have issued more than 110,000 loans worth around £30 billion.68 Part of the eligibility criteria for receiving a loan included borrowers having its business activity based in the UK.69 The Treasury, which was responsible for developing the COVID-19 business support schemes alongside the Department, told us that the purpose of the schemes was to “support British businesses and British jobs”. It explained that it had a “central focus on ensuring these support schemes were to the benefit of the UK economy”.70
24To understand how the Bank ensures that these schemes support UK businesses, we asked about...
Concluded (the committee's words)
To understand how the Bank ensures that these schemes support UK businesses, we asked about the barriers that were in place for preventing the offshoring of the taxpayer- guaranteed loans. The Bank responded that a requirement of the scheme was that “the economic benefit needs to go to the company—a single individual borrower”. We asked the Treasury and the Bank how they could be sure that all the money from the schemes remained onshore in the UK. The Bank told us that “tracking the money is a very relevant thing that we will be looking at over time and have looked at” but provided no further details on how this took place in practice other than referring to the eligibility criteria 61 Qq 52–53, 160 62 C&AG’s Report, para 3.11 63 Qq 54, 56 64 Q 104 65 Q 85; C&AG’s Report, para 3.15 66 Qq 157–160 67 Q 79, 82, 85 68 C&AG’s Report, Figure 1 69 Press Release – April 1, 2020 – British Business Bank (british-business-bank.co.uk) Q3: ‘How do I know if I am eligible to apply?’; CLBILS FAQs – April 16, 2020 – British Business Bank (british-business-bank.co.uk) Q: ‘What sectors can access the scheme?’ 70 Q 149 18 Lessons from Greensill Capital: accreditation to business support schemes for the schemes. The Bank emphasised that it had released summary data for its loan schemes, showing the regional distribution across the UK.71 The Bank had not published equivalent data for CLBILS owing to data protection and commercial considerations.72
25We asked the Treasury and the Bank whether they had undertaken any analysis of how...
Concluded (the committee's words)
We asked the Treasury and the Bank whether they had undertaken any analysis of how the £350 million loaned to GFG Alliance companies was used, or in which country the money was spent. The Bank told us it was aware that the loans were transferred to a “central treasury function within the GFG Alliance,” but it did not know where this was based. The Bank noted that it “would imagine that the whole tracking of that money through the administration would be something being looked at” but provided no further details.73 The Bank suggested that, if the money had left the UK, this could be a relevant factor in whether the guarantee holds as this may constitute a breach of the scheme rules.74 We asked the Bank whether, at any point, it considered that Greensill might have acted fraudulently. The Bank told us there was not proven fraud at the time Greensill was accredited, although several parties raised concerns later in 2020.75 It confirmed that it was “absolutely looking” into its fraud protocols to determine whether it needed to make any changes before lending money to business in the future.76 Learning lessons from Greensill’s failure
26Our work on the government’s response to the COVID-19 pandemic has demonstrated that there are...
Concluded (the committee's words)
Our work on the government’s response to the COVID-19 pandemic has demonstrated that there are important lessons to be learnt to improve government’s ability to respond to future emergencies and its business-as-usual service delivery. In 2021, as part of our Initial lessons from the government’s response to the COVID-19 pandemic inquiry, we highlighted the importance of being clear about risk appetite and risk tolerance, particularly as government was having to make decisions quickly at the start of the pandemic.77 Similarly, in our 2020 report COVID-19: Bounce Back Loan Scheme we found that the Treasury, the Bank and the Department prioritised delivery speed over all other aspects of value for money, exposing the taxpayer to potentially huge losses.78 The NAO report on the Bank’s accreditation of Greensill Capital found that in response to the policy need to deliver money to businesses at pace during the pandemic, the Bank streamlined its lender accreditation process. But it concluded that had the Bank applied a less streamlined accreditation process with more due diligence, it is possible that the situation could have been avoided.79
27We asked what lessons had been learnt or what could have been done differently as...
Concluded (the committee's words)
We asked what lessons had been learnt or what could have been done differently as a result of Greensill’s access to these taxpayer-backed schemes. The Treasury told us that it wanted to review all the reports and inquiries, such as the Boardman Review and reports by Select Committees, “in the round” before coming to any conclusions specifically on Greensill. The Department described a positive lesson from the Greensill experience that 71 Qq 147–149, 150–152 72 Press Release - July 6, 2021 - British Business Bank (british-business-bank.co.uk) 73 Qq 145–147 74 Q 152; C&AG’s Report, para 7 75 Q 123 76 Qq 153–4 77 Committee of Public Accounts, Initial lessons from the government’s response to the COVID-19 pandemic, Thirteenth Report of the Session 2021–22, HC 175, 25 July 2021 78 Committee of Public Accounts, COVID-19: Bounce Back Loan Scheme, Thirty-Third Report of the Session 2019–21, HC 687, 16 December 2020 79 C&AG’s Report, para 20 Lessons from Greensill Capital: accreditation to business support schemes 19 the “careful auditing, the fast reaction to stop new lending and the process of suspending the guarantee” led to a situation where it was hopeful it had correctly protected public money.80
28The Bank told us that it will closely evaluate its COVID-19 business support schemes, including...
Recommended (the committee's words)
The Bank told us that it will closely evaluate its COVID-19 business support schemes, including assessing whether there were things it would need “to do differently” with the accreditation processes going forward and more specifically whether there could have been better engagement with regulators as part of the accreditation process. The Bank said that it would be a “fruitful theme” to have discussions with development banks that have also been delivering similar schemes through the pandemic. The Treasury also agreed that it would conduct evaluations of all of the schemes, so that it could draw conclusions and build on what it had learned for the next time there needed to be an “extraordinary state intervention to deal with some market failure or other problem”.81 As we have previously highlighted, it is important that these evaluations are carried out as soon as possible after the event, otherwise there is a risk that departments learn lessons too late and repeat the same mistakes.82 80 Qq 161–162 81 Qq 32, 161–163 82 Committee of Public Accounts, COVID-19: Support for children’s education, Third Report of Session 2021–22, HC 240, 20 May 2021; Committee of Public Accounts, Initial lessons from the government’s response to the COVID-19 pandemic, Thirteenth Report of the Session 2021–22, HC 175, 25 July 2021 20 Lessons from Greensill Capital: accreditation to business support schemes
Evidence
Oral evidence sessions 2
- 22 Jul 2021Lessons from Greensill Capital5 witnesses: Catherine Lewis La Torre, Charles Roxburgh, Patrick Magee, Sarah Munby, Sir Tom Scholarparliament.uk ↗
- 13 May 2021Lessons from Greensill Capital1 witness: Rt Hon David Cameronparliament.uk ↗
Who gave evidence 6 witnesses
- Catherine Lewis La TorreChief Executive Officer, British Business Bank
- Charles RoxburghSecond Permanent Secretary, HM Treasury
- Patrick MageeChief Commercial Officer, British Business Bank
- Rt Hon David Cameron
- Sarah MunbyPermanent Secretary, Department for Business, Energy and Industrial Strategy
- Sir Tom ScholarPermanent Secretary, HM Treasury
Correspondence 4 letters
- 9 Mar 2022Correspondence from Catherine Lewis La Torre, Chief Executive, British Business Bank, re British Business Bank (the Bank) review, dated 2 March 2022
- 18 Jan 2022Correspondence from Sarah Munby, Permanent Secretary, Department for Business, Energy & Industrial Strategy, re PAC recommendations – “Lessons from Greensill Capital”, dated 13 January 2022
- 16 Nov 2021Correspondence Catherine Little, Director General, Public Spending Head of Government Finance Function, re Lessons from Greensill Capital, dated 7 September 2021
- 6 Jul 2021Correspondence from RT David Cameron, Former prime minister of the United Kingdom, re follow up to Greensill, dated 25 June 2021