Source · Select Committees · Public Accounts Committee
Recommendation 10
10
The Scheme rules required commercial lenders to deliver loans and pursue recovery processes in line...
Conclusion
The Scheme rules required commercial lenders to deliver loans and pursue recovery processes in line with their existing business-as-usual standards. The Department and HM Treasury stated that the majority of recoveries and counter-fraud efforts comes from lenders. The Department told us that the commercial banking sector was the “best of the best” at managing the Scheme’s recovery process in line with equivalent standard loans, with the Bank adding that lenders have “decades, if not centuries” of related expertise.21 The Department had therefore concluded that it would not make sense for it to recover loans because lenders undertook that role. It explained that the Department, therefore spends a “tiny fraction” of budget on loan recovery compared with the resources among lenders and law enforcement agencies. Instead, the Department and the Bank told us that it saw its role to define the minimum standards and make sure the overall system is working well.22
Government Response
Not Addressed
HM Government
Not Addressed
4: PAC conclusion: We are concerned that the Department is placing too much reliance on lenders to minimise taxpayer losses without incentivising them to do so. 4a: PAC recommendation: The Department should, as part of its Treasury Minute response, set out how it will use legal, regulatory and contractual incentives to improve the lenders’ performance in managing the loans and the risks to the taxpayer. 4.1 The government agrees with the Committee’s recommendation. Recommendation implemented 4.2 The ongoing management of the BBLS and associated financial risks remains one of the highest priorities for the department and the Bank. 4.3 The primary means by which the Bank assesses lenders’ compliance with the terms and conditions of the Guarantee Agreement is through its ongoing lender audit and assurance programme. This includes examining the effectiveness and adequacy of lender recovery efforts. Where issues are identified, the Bank can take remedial action, ranging from creating an action plan with the lender’s management team through to cancellation of a guarantee. Experience from the first round of audits showed it was effective in remedying identified issues