Bank of England felt no Treasury pressure to give Greensill preferential treatment, says Bailey
The Bank of England did not face pressure from the Treasury or David Cameron to give Greensill Capital preferential treatment in evaluating the firm for a large-scale loan, according to bank governor Andrew Bailey.
Bailey told MPs today that lobbying efforts from Cameron did not mean the failed supply chain finance firm had better treatment and added that the Bank only spent a very small amount of time evaluating Greensill Capital.
Cameron sent more than 50 text messages and emails to ministers, civil servants and Bank of England officials in a bid to get Greensill involved in the government’s emergency Covid Corporate Financing Facility (CCFF).
CCFF saw the Bank of England buy £37bn of pounds worth of bonds from investment grade British companies to inject liquidity into the financial system.
Greensill Capital, which went bust in March, were not admitted to the scheme despite Cameron’s efforts.
The former Prime Minister called the decision “bonkers” in a text to Treasury permanent secretary Sir Thomas Scholar.
Bailey told the Treasury’s Select Committee today that “there was never any pressure on us” from the Treasury, despite some suggestions to the contrary.
Deputy Bank of England governor Sir Jon Cunliffe, who received personal emails from Cameron on behalf of Greensill Capital, agreed.
“I certainly didn’t feel any pressure from the Treasury and if I was lobbied I was only lobbied a couple times,” Cunliffe said.
Greensill Capital went bust in March this year, leaving creditors more than £1.5bn out of pocket and more than 1,000 people out of a job.
The firm operated by helping pay the suppliers of large businesses in a complicated process known as supply chain financing.
Former City minister Lord Paul Myners said the company’s collapse would indirectly cost taxpayers up to £5bn.
Australian investment banker Lex Greensill, the founder of the firm, told the Treasury Select Committee weeks ago that his company failed after its insurance provider refused to renew its policy.
Bailey said it was clear the firm had an “excessive reliance on insurance companies”.
“He couldn’t sell his notes in the absence of insurance money,” he said.
“When his insurance cover fell away he went from everything to nothing. That’s a vulnerability he should have thought about.”
Cunliffe said that you “often see sensible ideas turn into subprime” – a term for when people with poor credit ratings are given loans.