Source · Select Committees · Public Accounts Committee
Recommendation 11
11
Although the Department referred to lenders as the “arms and legs” of the Scheme, none...
Conclusion
Although the Department referred to lenders as the “arms and legs” of the Scheme, none of the witnesses could tell us how much lenders are spending on counter-fraud activities. The FCA said, for example, that lenders had “scaled up quite significantly”, but it could not tell us when they had done so and it recognised that it still needed to discuss with lenders the size and scale of resources in place. It had issued some guidance to lenders; as the NAO reported, it wrote to lenders in July 2021 to remind them of their 16 Qq 17, 55; C&AG’s Report, Appendix One, para 12 17 Qq 19, 21, 53; C&AG’s Report, Appendix One, para 6 18 Qq 17, 53; C&AG’s Report, Appendix One, para 7 19 C&AG’s Report, para 2.29 20 Correspondence from Catherine Lewis La Torre, Chief Executive, British Business Bank, Re Bounce Back Loans, 27 January 2022, published 31 January 2022 21 Qq 28, 55, 57, 62, 92; C&AG’s Report, para 2.27 22 Qq 28, 62 12 Bounce Back Loans Scheme: Follow-up obligations to report fraud and have an adequate level of resources.23 The Bank explained that lenders were not keen on doing a detailed cost allocation exercise to identify the level of resources, but lenders were reporting their activity to a lender forum for sharing best practice. In its letter to us after our evidence session, the Bank told us that lenders had so far identified 1.4% of the loans by value (£631.5 million) as having suspected fraud, but it expected this number to increase.24
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