Sanjeev Gupta's Wyelands Bank ordered to repay savers in unprecedented intervention

A lender owned by Sanjeev Gupta has been ordered to repay all of its depositors in an unprecedented intervention by the Bank of England amid surging pressure on the steel tycoon. 

Wyelands Bank has been told by regulators to refund all retail customers following a cash injection by Mr Gupta.

The magnate's GFG Alliance empire has come under unprecedented scrutiny this week after its main financial backer Greensill Capital lost the support of two asset managers that had underpinned its supply chain financing model.

The Bank of England said its regulatory arm the Prudential Regulation Authority (PRA) has been "engaging closely" with Wyelands Bank, which is part of GFG Alliance, and has "required it to operationalise an orderly repayment of its deposits". 

Sources close to the regulator said they believe this is the first time a firm has been told to repay deposits since the PRA was created in 2013. Discussions between the two sides have been going on for months, one person aware of the talks said.

Wyelands' 2019 annual report said it had more than 15,000 savers in Britain and £726m in deposits, but this is understood to have since dropped to 4,000 savers and £210m in deposits. The lender, which has around 40 staff, stopped taking 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 turmoil created by both Brexit and the pandemic" the bank's shareholders have recapitalised the business to ensure retail depositors are repaid in full. Wyelands will update savers on Monday, adding that the bank is "solvent and has sufficient financial resources to meet all of its obligations". 

The development came as Frankfurt financial regulator BaFin banned Greensill's German bank in from selling assets and making payments because there is an imminent risk it could become over-indebted.

BaFin has ordered that the bank to close for business and blocked it from accepting payments that were not intended for repaying debt to Greensill Bank.

A probe by BaFin found irregularities over how Greensill Bank had booked certain assets, compounding the woes of parent company Greensill Capital as it seeks to stave off a damaging collapse.

BaFin ordered KPMG to carruy out a forensic investigation into the business last year as part of a wider operation, according to Bloomberg.

One of the most serious findings was that the bank had booked claims for transactions that had not yet occurred but which were accounted for as if they had been.

GFG has previously said Wyelands' growth was partly driven by expanded business with companies with whom it had relationships. Wyelands' regulatory filings show it had debt concentrations in the metals and power industries.

Meanwhile Greensill Capital, the troubled finance firm that counts David Cameron as an adviser, is on the cusp of filing for insolvency in the UK as it races to sell the business. 

The company is preparing to enter pre-pack administration to cut its debt burden while also seeking a buyer, as doubts swirl over its future. 

Greensill - which made founder Lex Greenhill a billionaire - is understood to be in talks about selling its operating business to private equity company Apollo Global Management for about $100m (£72m).

Bosses said they have entered a period of exclusivity with a “leading global financial institution” and hope to conclude a deal this week. 

Hewlett Packard Enterprises chairman Patricia Russo has resigned as a member of Greensill's advisory board.

Greensill is a pioneer in “reverse factoring” - a form of cash advance where a company pays its suppliers early using loans. It also sold stakes in these advances to banks such as Credit Suisse.

The business secured the right to issue taxpayer-backed coronavirus business loans last year following a string of meetings with senior Treasury official Charles Roxburgh. An investigation by the British Business Bank, which administers the scheme, has since found breaches of the rules over these loans and warned the firm it will withdraw the accompanying taxpayer guarantees.

On Monday Credit Suisse froze funds linked to Greensill, which provides finance to businesses including the empire owned by steel magnate Sanjeev Gupta. The Swiss bank warned that there is considerable uncertainty about what some of these holdings are worth.

Swiss asset manager GAM said on Tuesday that it was winding down a fund which invests in loans sourced by Mr Greensill, piling further pressure on the Australian-born financier as he fights to save the remains of his supply-chain finance empire.

Meanwhile, SoftBank Group’s Vision Fund has substantially written down its $1.5bn holding in Greensill and is reportedly considering dropping the valuation to close to zero.

The saga represents a dramatic downfall for founder Mr Greensill, who predicted less than a month ago that there would be a growing demand for the type of financing in which he specialises.  

Mr Greensill grew up on a sugar cane and melon farm in Australia, setting up the company in 2011 after watching the financial hardships his parents experienced from delayed payments for the crops they produced.  

While doubts about the business have swirled for months, some have continued to buy into his vision. In a government-commissioned report published only this week, as the London-based firm was gripped in a rapidly escalating crisis, Greensill was even highlighted as one of the leading lights within British fintech.  

Greensill declined to comment.