A Sanjeev Gupta-owned lender has been ordered to pay back all its depositors in an unprecedented Bank of England intervention amid mounting pressure on the steel tycoon.
Regulators have asked Wyelands Bank to reimburse all retail customers following a cash injection by Mr. Gupta.
The tycoon’s GFG Alliance empire came under unprecedented scrutiny this week after its main funder Greensill Capital lost the backing of two asset managers who had backed its chain funding model. ‘supply.
The Bank of England said its regulatory arm, the Prudential Regulation Authority (PRA), was “working closely” with Wyelands Bank, which is part of the GFG Alliance, and required it to “operationalize an orderly repayment of its deposits “.
Sources close to the regulator said they believe this is the first time a company has been asked to repay deposits since the PRA was established in 2013. Discussions between the two sides have been going on for months, said someone familiar with the talks.
Wyelands’ 2019 annual report said it had more than 15,000 savers in Britain and £ 726m in deposits, but that figure has since dropped to 4,000 savers and £ 210m in deposits. The lender, which has around 40 employees, stopped receiving new deposits late last year. GFG Alliance said it now plans to adopt a new strategy without giving details.
Mr Gupta said that “after the turbulence created by both Brexit and the pandemic”, the bank’s shareholders recapitalized the company to ensure full repayment to depositors. Wyelands will notify savers on Monday, adding that the bank is “solvent and has sufficient financial resources to meet all of its obligations.”
The move came as Frankfurt’s financial regulator BaFin banned Germany’s Greensill Bank from selling assets and making payments because there is an imminent risk that it will become over-leveraged.
The BaFin ordered the bank to shut down and prevented it from accepting payments that were not intended to repay the debt of Greensill Bank.
An investigation by BaFin uncovered irregularities in the way Greensill Bank had reserved certain assets, compounding the woes of parent company Greensill Capital as it seeks to avert a damaging collapse.
BaFin ordered KPMG to conduct a forensic investigation into the company last year as part of a larger operation, according to Bloomberg.
One of the more serious findings was that the bank had booked accounts receivable for transactions that had not yet taken place but which were recorded as if they had been.
GFG has previously said that Wyelands’ growth was in part driven by expanding business with companies with which it has relationships. Wyelands regulatory documents show it had concentrations of debt in the metals and energy industries.