The Bank of England has issued a public reprimand to the Greensill-linked Wyelands Bank after discovering “wide-ranging significant regulatory failings” at the lender, which is owned by Sanjeev Gupta, boss of the troubled Liberty Steel.
Wyelands was found to have breached a series of rules, including falling short on governance and risk controls, reporting its capital position incorrectly, and failing to retain messages sent on WhatsApp between 2016 and 2020.
The central bank’s regulatory arm, the Prudential Regulation Authority (PRA), said it would have fined Wyelands Bank £8.5m had it not already been in the process of winding down. “The PRA accepted that [Wyelands] has very limited financial resources,” the regulator said.
The lender, which Gupta renamed after his country house and estate near Chepstow in south Wales, also became the first to be censured by the Bank of England for breaking rules limiting exposure to a single party, having agreed to too many loans and complex financial agreements with companies linked to its owner, Gupta Family Group Alliance (GFG). GFG companies were Greensill Capital’s biggest clients before the scandal-hit firm collapsed in early 2021.
The central bank’s investigation confirmed that Wyelands had entered several complex financial agreements on the recommendation of GFG and failed to follow through on plans to diversify its business away from GFG and associated businesses.
It then failed to notify regulators when business with clients associated with GFG grew beyond regulatory limits. “In practice, Wyelands’ business was almost entirely reliant on GFG and entities originally introduced by GFG,” the central bank said.
Wyelands was ordered to cap the loans offered to GFG-affiliated companies in September 2019, amid concerns that it had built up an “unacceptable concentration of risk”. The lender finally stopped trading in 2021, after regulators forced it to wind down its activities and pay back depositors.
“The PRA expects firms to establish and maintain effective governance and risk management controls at all times,” said the regulator’s boss, Sam Woods.
“This is particularly important where a firm engages in complex transactions or where a significant proportion of its business is introduced by its wider group. Wyelands’ wide-ranging and serious failings resulted in the PRA taking swift supervisory action to minimise the risk to depositors and issuing today’s strong censure.”
Wyelands Bank said it welcomed the fact that the matter was being drawn to a close.
The news came as it emerged that Liberty Steel in Australia, also a GFG company, had secured a A$50m (£27m) grant from the Australian government to support an expensive upgrade to its Whyalla steel facility to use a greener electric arc furnace. The investment suggests that Gupta’s companies in other countries are still able to draw on significant funds, raising questions about whether the UK central bank fine could have been paid.
GFG is a sprawling collection of companies, many related to steel and aluminium production, spanning from the UK to the US and Australia, with some controlled by a parent company in Singapore. GFG has previously claimed to employ 35,000 people worldwide.
However, companies within the GFG’s broad umbrella do not all function as members of a normal conglomerate, and are held separately. The complexity and opacity of GFG’s financial structures was a key reason behind the UK government’s refusal to grant state aid to Liberty Steel in the UK at the start of the coronavirus pandemic. Kwasi Kwarteng, who was then business secretary, said the government had concerns about “financial engineering” related to Liberty Steel in the UK.
A GFG spokesperson said: “The shareholder has injected significant funding into Wyelands Bank so all depositors were repaid in full, ensuring that none of Wyelands’ depositors suffered losses. The shareholder has also provided funding to ensure Wyelands Bank continued to operate in order to allow the regulatory process to be completed and for the bank to conclude its solvent wind down.”
