What happened at Greensill and GFG?

The Financial Reporting Council has launched the latest in a series of official investigations into events surrounding Greensill Capital and one of its biggest borrowers, Sanjeev Gupta’s GFG Alliance. But how did we get here?

– Who is Sanjeev Gupta?

Mr Gupta was born in India as the son of a wealthy businessman. Educated in England he was thrown out of his Cambridge halls for setting up a company from the accommodation.

He built his name trading commodities around the world, but nearly a decade ago he entered the British steel industry for the first time. Since then he has snapped up many struggling steel businesses in the UK and around the world, earning him his “saviour of steel” nickname in the British press.

– What was Mr Gupta’s role in Greensill Capital?

He had no role at Greensill Capital, but he was one of the company’s biggest borrowers.

In March, Greensill’s lawyers revealed the collapsed financing company had exposure of around 5 billion dollars (£3.6 billion) to Mr Gupta’s GFG Alliance after providing many loans.

GFG and Greensill became heavily reliant on each other as a result.

– What is GFG Alliance?

GFG is a loose collection of industrial companies linked to Mr Gupta and his father, Parduman K Gupta. Covering companies from renewable power to commodity trading and steelworks, GFG employs around 35,000 people across 30 countries, including thousands at Liberty Steel.

It has never published consolidated accounts.

– How did Greensill collapse?

Greensill’s collapse was the culmination of a long process, but the final nail in the coffin was when its main insurer walked away.

Greensill had supplied loans to many customers. These were then lumped together and sold off, via a Credit Suisse fund, to outside investors, who would buy a share in the loans and cash in when they were paid back. These loans were insured.

But insurer Tokio Marine decided not to renew the insurance following concerns that one of its employees might have acted beyond his authority. Lex Greensill later told MPs this event “ensured Greensill’s collapse”.

– What is Wyelands Bank?

In 2016 Mr Gupta bought Tungsten Bank, promising to make sure much-needed finance would get to the UK’s commodities and steel industry. He later renamed it Wyelands after an estate he owns in Wales.

– How many investigations have been launched?

Several probes are looking into what happened around Greensill and GFG:

– MPs on the Treasury Select Committee, Public Accounts Committee, Public Administration and Constitutional Affairs Committee, and Business, Energy and Industrial Strategy Committee are all looking into issues from different angles.
– The Serious Fraud Office has launched an investigation into GFG and its financing arrangements with Greensill.
– The National Audit Office is probing Greensill’s involvement in a Government-backed pandemic loan scheme, which is also being looked at by the British Business Bank.
– Lawyer Nigel Boardman is probing the Government’s use of supply chain finance.
– The Cabinet Office is reviewing the Lobbying Act.
– The Financial Conduct Authority (FCA) is probing “potentially criminal” allegations about the failure of Greensill.
– The German financial regulator has filed a criminal complaint against Greensill Bank, a Germany-based subsidiary.
– On Monday the Financial Reporting Council (FRC) said it would probe Greensill and Wyelands’ auditors.

– Why did the Bank of England tell Wyelands to repay deposits?

Wyelands Bank had since 2018 faced concerns that it might have broken rules on lending to “connected entities”. This meant it might have been lending to companies ultimately owned by Mr Gupta in a way that could have broken rules.

In March this year, after working with the BoE, Wyelands said it had returned cash to all depositors.

– How much does the taxpayer expect to lose from the Greensill collapse?

At least around £8 million can already be seen, according to Charles Roxburgh, a Treasury official, but the final amount is likely to be more. Estimates have ranged up to several billion pounds, but these are based on heavy guesswork about the knock-on impact of Greensill’s collapse.

– What was David Cameron’s role in Greensill?

Mr Cameron worked as an adviser to Greensill. Early in the Covid-19 pandemic, he lobbied former Government colleagues, sending dozens of texts and emails and making many phone calls.

He tried to convince ministers to allow Greensill, and other supply-chain financiers, to sign up to the Covid Corporate Financing Facility (CCFF), a BoE loan scheme designed to help big companies during the pandemic.

The attempts, which would have seen Greensill issue loans on behalf of the scheme, were ultimately unsuccessful.

However Greensill did get involved in the Government-backed coronavirus large business interruption scheme (CLBILS). Last week the Financial Times reported that many of Greensill’s CLBILS loans went to GFG companies.