Credit Strategy – Top credit news by Credit Strategy

According to Hannah Bernard, head of corporate banking at Barclays, HMRC had said up-to-date borrower turnover figures were ‘not available’, at the bank’s request. She was addressing the Business, Energy and Industrial Strategy Committee yesterday (March 15).

Figures from the British Business Bank show that more than £47bn has been paid out under the Bounce Back scheme. The government estimates that 7.5%, or £3.5billion, is fraudulent.

As the amount borrowable was based on turnover, Barclays had to ask companies for their turnover. Without being able to verify the veracity, they had to hope that the candidates were telling the truth.

“The system required many self-attestations, in particular the turnover of the companies”, specifies Bernard.

“We made the suggestion, [the actual turnover figure] was not available, so we had to use self-attestation”.

Of the estimated £3.5bn in fraudulent loans, Bernard said “90% of this will be due to self-attestation”.

The British Business Bank, which ran the scheme on behalf of the government, had identified turnover inaccuracies as the main fraud risk in October 2020, according to a National Audit Office report.

Bernard added that it is possible that many companies that have inflated their turnover are still repaying their loans.

Credit strategy has contacted HMRC for comment.

Duplicate Loans
Duplicate loan applications became another problem, with Bounce Back loans being given to businesses that had already borrowed from another bank.

In June 2020, the National Audit Office claimed the British Business Bank had a ‘simple’ duplicate checking process in place – but it was too late to stop many people applying twice.

Karl Reid, HSBC’s head of government loans at commercial banks, told the Committee that it had taken longer than other banks to guard against duplicate claims. Full control was only put in place on December 8, 2020.

Other banks said it took a few weeks.

Barclays said it currently estimates 1.5% fraud in its loans, Lloyds said 2% to 2.5%, HSBC said 1.81%, Santander said less than 1%, while NatWest said about 2%.

Criticism of the British Business Bank

Lord Agnew, a former fraud minister who publicly resigned from Cabinet and Treasury posts in January, said the British Business Bank’s board should be sacked.

He told the Committee there had been a “ridiculous” lack of oversight and “dismal” management of the Bounce Back loan scheme.

“A fish rots from head to bottom and I’m surprised you don’t have the president of the investment bank [Lord Smith of Kelvin] here today (March 15),” Agnew said.

The banks benefit from a 100% taxpayer guarantee to cover any losses once their own recovery efforts have been exhausted. The £47.4 billion given in Bounce Back Loans is close to the annual defense budget.

Agnew claimed the British Business Bank would not be able to force banks to collect loans to protect the taxpayer, due to a lack of data and transparency in the loan scheme.

The banks had “a huge moral obligation” to try to recover the funds before claiming the state guarantee, Agnew said.

Patrick Magee, commercial director of the British Business Bank, countered that lenders were correctly targeted for recovery performance: “We were given a huge challenge and we rose to that challenge.”

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