Labor seeks to step up pressure on Sunak over Greensill
Chancellor Rishi Sunak was invited Tuesday by the Labor Party to engage in a “full, transparent and thorough investigation” into how the collapsed financial group Greensill Capital was granted the right to exempt. Tens of millions pounds of government-guaranteed Covid-19 loans to businesses.
Sunak is under pressure to answer questions about the Treasury’s role in a case that saw Greensill accredited as a lender under one of the government’s coronavirus loan programs, even though he was exempt from collateral imposed on other banks.
Phantom Chancellor Anneliese Dodds said: “The public will be dismayed to learn how much their money has been put at risk by the Tories’ soft relationship with Greensill Capital.
So far, much of the political attention surrounding the transactions of Australian financier Lex Greensill, founder of the eponymous financial group, has been on former Prime Minister David Cameron, who was an adviser to the company.
Dodds wants to put Sunak, who has come under direct pressure from Cameron, under further scrutiny, including over the decision to allow Greensill Capital to make loans under the government’s Big Interruption Loan program. companies against the coronavirus.
In a letter to Sunak, Dodds said parliamentary written responses confirmed that “Greensill is accredited to lend under CLBILS although it is not regulated by the Bank of England or the Financial Conduct Authority”.
She added that this meant Greensill was not subject to the capital adequacy and stress tests that applied to most other lenders accredited to lend under CLBILS.
Dodds asked Sunak to explain which government department formulated the criteria for accreditation of lenders under the program and whether the Treasury has raised concerns with the British Business Bank, which administers the program.
A Treasury official said the accreditation process was managed independently by the British Business Bank. “It is not a requirement to be regulated by financial regulators to lend under the schemes,” added the official.
While other lenders such as Barclays could issue CLBILS loans worth up to £ 200million, companies using supply chain finance – including Greensill – were limited to a cap of £ 50million. of pounds sterling.
Greensill has called for his cap to be raised to £ 200million. That request was dismissed, with Charles Roxburgh, a senior Treasury official who has held nine meetings with Greensill Capital, saying £ 200million would represent ‘significant exposure’.
However, even at the lower bound, Greensill was still able to lend millions of pounds through multiple loans to companies linked to Sanjeev Gupta, the steel mogul behind the GFG Alliance, which has multiple assets in the UK.
Dodds also asked Sunak why Greensill was allowed to come between the government and its suppliers, including NHS pharmacies.
Dodds asked Sunak why – if Whitehall was subject to its own quick pay code – Greensill was needed to offer prompt payments to vendors in exchange for a discount, when the government could just pay on time.
The Treasury is expected to give a full answer to Dodds’ questions in the coming days.
Meanwhile, the government’s new payback loan program was launched on Tuesday, providing businesses with more state-guaranteed loans to support them as the economy begins to reopen.
Sunak said, “As we safely reopen parts of our economy, our new turnaround loan program will ensure that businesses continue to have access to the financing they need as we emerge from this crisis.”
The program, also administered by the British Business Bank, will provide loans through what the government has called “a diverse network of accredited commercial lenders”.
Almost all of the 18 companies initially authorized to offer loans under this scheme are licensed banks in the UK, with the exception of Ebury, controlled by Spain’s Santander bank, and Skipton Business Finance, which belongs to a construction company.