Source · Select Committees · Public Accounts Committee
Recommendation 13
13
The NAO reported that the arrangements for pursuing borrowers offered limited commercial incentive for lenders...
Conclusion
The NAO reported that the arrangements for pursuing borrowers offered limited commercial incentive for lenders to maximise recovery of overdue loans.28 In contrast, the Bank told us that it believed that lenders have strong legal, contractual and regulatory obligations to recover loans. This included oversight by the FCA and lender audits by the Bank to ensure lenders are complying with the Scheme rules.29 The Department subsequently explained at the time of the launch ministers made the decision that 12 months was a reasonable cap for the recovery process and it can claim back any guarantee from a lender if lender audits show they have not followed the required Scheme rules.30 The Bank told us that, so far, it had audited every lender, but that this had focused on their loan disbursement rather than recovery activity because repayments have only recently started. It explained that the second phase of the Bank’s audit will focus on recoveries and 23 Qq 30, 62–64, 67; Comptroller & Auditor General, Investigation into the Bounce Back Loan Scheme, Session 2019–2021, HC 860, 7 October 2020, para 2.29 24 Q 63; Correspondence from Catherine Lewis La Torre, Chief Executive, British Business Bank, Re Bounce Back Loans, 27 January 2022, published 31 January 2022 25 Q 73 26 Correspondence from Sarah Munby Permanent Under-Secretary of State, Department for Business, Energy & Industrial Strategy, re PAC hearing on the Bounce Back Loan Scheme, dated 9 February 2022, published 22 February 2022 27 Qq 1–4, Public Accounts Committee, Oral Evidence: BEIS Annual Report and Accounts, 2020–21, HC 1052, 23 February 2022; and Comptroller & Auditor General, Investigation into the Bounce Back Loan Scheme, Session 2019–2021, HC 860, 7 October 2020, para 3.8 28 C&AG’s Report, para 20 29 Qq 14, 24 30 Qq 24–26, 74–75; Correspondence from Sarah Munby Permanent Under-Secretary of State, Department for Business, Energy & Industrial Strategy, re PAC hearing on the Bounce Back Loan Scheme, dated 9 F
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