Source · Select Committees · Public Accounts Committee
Recommendation 5
5
We are concerned that the Bank’s investigation into Greensill has progressed much more slowly than...
Conclusion
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
Government Response
Not Addressed
HM Government
Not Addressed
5.1 The government agrees with the Committee’s recommendation. Recommendation implemented 5.2 The Bank has written to the Committee on this matter on 17 December 2021. 5.3 The Bank’s priority is that the investigation into Greensill’s lending under the scheme is thorough, in order that a fully informed view can be taken as to whether the CLBILS rules were breached by Greensill. The obligations of the Guarantor remain suspended whilst the investigation into Greensill’s lending under CLBILS continues. Whilst the suspension is in place, the Government is not obliged pay out on any claim on the guarantee in respect of CLBILS facilities provided by Greensill. 5.4 In light of the amount of taxpayer money potentially at stake, 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 Bank will inform the Committee when the outcome of its investigation into Greensill’s lending has been reached, which is expected to be in the early months of 2022. 5b: PAC recommendation: The Bank should write to the Committee as soon as the investigation has concluded with the outcome it has reached and how it will apply any lessons learned. We expect the lessons learned to include, but not be limited to: • how better sharing of information between public bodies can be achieved; • the correct balance between pre-accreditation checks, and post-accreditation audits; and • whether warning signs that lenders are under financial pressure – such as downgrades in credit ratings – amount to a notifiable event that should result in the Bank re-considering past accreditation decisions