Greensill was accredited by the British Business Bank as a lender under the government’s Covid-19 business support scheme, a review from the National Audit Office (NAO) has found.
It was approved via a streamlined version of the British Business Bank’s established accreditation process. This was designed so it could respond to a requirement to provide prompt access to finance for businesses, with the bank placing greater reliance on post-accreditation audit checks.
The British Business Bank did subsequently become concerned that Greensill might have exceeded its lending limits and launched an investigation. Greensill has denied making loans outside the scheme rules, and in March 2021 entered administration.
The supply chain finance firm was made an accredited lender under both the Coronavirus Business Interruption Loan Scheme (CBILS) and Coronavirus Large Business Interruption Loans Scheme (CLBILS), and by October 2020 had loaned £418.5m. Due to the government guaranteeing 80% of the value of loans made through the schemes, if Greensill’s loans are not repaid by the borrowing companies, the government could lose almost £335m.
On 19 April 2020, Greensill applied to lend up to £1bn through CLBILS, and the British Business Bank applied its standard accreditation process. It noted that the firm had “robust internal processes”, limited losses and low default rates across its lending facilities. It did, however, say that it carried out limited due diligence on the company’s application. In the end it did approve Greensill as a lender, but only up to £400m - with a maximum loan limit of £50m per borrower.
The NAO’s investigation also says the Department for Business, Energy & Industrial Strategy (BEIS) was particularly interested in Greensill’s accreditation. It told the auditor that it “repeatedly requested updates” on the supply chain finance firm’s accreditation - emailing the British Business Bank eight times over a 19 week period, asking whether it might be accredited to lend more than £50m per borrower.
On 2 October 2020, the British Business Bank became concerned that Greensill’s lending may have contravened scheme rules on lending to groups, identifying that it had made seven loans totalling £350m to Liberty Steel owner’s GFG Alliance. Greensill told the state-owned economic development bank on 6 October that it considered the loans to be compliant, however the British Business Bank escalated its concerns to HM Treasury on 7 October and BEIS on 9 October.
It then opened an investigation into Greensill’s lending on 12 October, suspending the government guarantees on 2 March 2021. Through its administrators, Greensill has denied making loans outside the scheme rules and has challenged the fairness of the British Business Bank’s procedures. This includes claiming that the timeframe provided to collate the necessary information to respond to allegations was unfair. The investigation is ongoing, and the guarantees to Greensill’s loans remain suspended.
Greensill sought to access several other government business support schemes. This included a £500m loan supported by an Export Development Guarantee from UK Export Finance, and access to the Coronavirus Corporate Finance Facility through HM Treasury, both of which were rejected.
Commenting on the findings, the NAO’s auditor general Gareth Davies: “The British Business Bank used a streamlined version of an existing accreditation process in response to the policy requirement to provide businesses with prompt access to finance during the pandemic. In the case of Greensill, this process did not identify the risks that materialised less than a year later when Greensill entered administration.
“It is to the British Business Bank’s credit that it quickly picked up the loans allegedly in breach of the scheme rules, but had it applied a different accreditation process it is possible that this situation could have been avoided.”