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NAO Investigates why Greensill Capital was accredited for Covid-19 loans

Thursday 8th July , 2021

National Audit Office (NAO) has provided a review on why the British Business Bank decided to authorise Greensill Capital to give out emergency Covid-19 loans.

Greensill was made an accredited lender under both Government Coronavirus Business Interruption Loan schemes, and by October 2020 had loaned £418.5 million. The government guarantees 80% of the value of loans made through the schemes, meaning that if Greensill’s loans are not repaid by the borrowing companies, government could lose almost £335 million.

The British Business Bank subsequently became concerned that Greensill might have exceeded its lending limits and launched an investigation. According to the review, Greensill denies making loans outside the scheme rules, and in March 2021 entered administration. 

Gareth Davies, the head of the NAO, said ,“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 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.”

According to the review, on 19 April 2020 Greensill applied to lend up to £1 billion through Coronavirus Large Business Interruption Loans Scheme (CLBILS). The Bank applied its standard accreditation process, noting Greensill’s robust internal processes, limited losses in recent years and very low default rates across its lending facilities. However, it also noted that it had carried out limited due diligence on Greensill’s application, in keeping with how it treated other similar lenders.

The Bank approved Greensill as a lender, but only up to £400 million, with a maximum loan limit of £50 million per borrower.

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