Wyelands Bank only managed to bag two customers under a new business plan that was meant to make it less reliant on its biggest shareholder, industrialist Sanjeev Gupta, MPs have been told.
Wyelands chief executive Stephen Rose said that around 80% of the bank’s supply chain finance business came through companies that were part of, or customers of, GFG Alliance, a loose grouping of businesses owned by Mr Gupta and his family.
Mr Gupta bought the bank in 2016, promising to get money to small and medium-sized industrial businesses.
But for the first couple of years, Wyelands’ business plan was designed to push supply chain finance to GFG-linked firms. The bank set out to change that in 2019, targeting UK customers with no links to GFG.
Restrictions placed on Wyelands by regulators around this time hampered these efforts and left the bank with just two clients under the new business plan that were not introduced by GFG, Mr Rose told the Business, Energy and Industrial Strategy Committee.
Wyelands was forced to pay back all of the deposits it held to its depositors earlier this year after an order from the Prudential Regulation Authority (PRA).
Mr Rose said that the bank had already been gathering money to pay back depositors before the PRA order. It had originally planned to pay back this money as it was due, rather than in one go, he said.
He also revealed that the bank had been unaware of links between some Wyelands clients and GFG.
“Some of the initial connected party analysis that had been done had been deficient in some respects,” he said. Staff could have been better trained, he added.
“In retrospect, the facility should have been set up with more robust safeguards,” he said.
MPs also heard from King & King, a smaller audit company which looks at many of GFG’s accounts.
But Milan Patel, a partner at the auditor, said he had been banned by GFG’s lawyers from divulging confidential information during the hearing.
This meant Mr Patel was unable to answer many of the questions that MPs had around King & King’s GFG audit.
The future of GFG and its business was thrown into doubt earlier this year when its biggest lender, Greensill Capital, collapsed.
Greensill, a supply chain finance company, had provided so-called “future receivables” loans to GFG. In normal supply chain finance, a lender like Greensill will provide money to a supplier, such as GFG, after the supplier has sold products to a customer.
If a supplier sells a product for £100,000 to a customer, Greensill will pay that money directly to the supplier, minus a small fee. It will take the invoice as security on the loan and be repaid when the customer pays the invoice.
This means that the supplier does not have to wait weeks, or months, to get its money.
But future receivables meant that Greensill predicted sales that GFG might make in the future to companies it had not sold to in the past.
Mr Rose said of Wyelands: “We don’t fund future receivables and I wouldn’t ever do so”
Mr Patel said he had never heard of future receivables until he read about them in the press.
On Tuesday, Greensill separately revealed in a letter to the Treasury Select Committee that future receivables made up 11% of its total asset flow in 2020, up from 2% in 2018.