Rishi Sunak is facing questions over why failed finance firm Greensill Capital was chosen to give out emergency Covid loans, despite not being regulated as stringently as banks.
Greensill Capital, which counted David Cameron as a senior adviser, was the only non-bank financial firm that was chosen by the government to administer the emergency coronavirus loan schemes.
The firm went bust weeks ago, which has left UK taxpayers on the hook for hundreds of millions of loans.
Greensill was not subject to the same stress tests as other banks, which sees firms tested by the Bank of England on whether they would be able to stay afloat in an economic crisis.
Shadow chancellor Anneliese Dodds told The Times that “the public will be appalled to hear how much of their money may have been put at risk by the government allowing an unregulated financial services firm to lend money with a taxpayer guarantee”.
It comes as Germany’s banking private banking association today said it had paid out around €2.7bn ($3.17bn) to more than 20,500 Greensill customers as part of its deposit guarantee scheme after the bank collapsed last month.
The banking association said only a few customers had yet to receive compensation under the protection fund, which protects individuals but not institutional investors.
Greensill offered a niche finance product called supply chain finance and its downfall threatens to drag Sanjeev Gupta’s Liberty Steel operations in the UK, which were funded in part by Greensill, into administration as well.
The payout news came as lobbying on behalf of the failed bank came in for further scrutiny in the UK.
Labour today called on the government to tighten the law on lobbying amid continuing controversy over Cameron’s activities on behalf of Greensill Capital.
Shadow Cabinet Office minister Rachel Reeves said ministers should include legislation in next month’s Queen’s Speech to expand the register of lobbyists to cover so-called “in house” lobbyists like the former prime minister.
Under the existing rules, Cameron did not have to make a declaration when he went to work for Greensill after leaving office as he was not an outside “consultant” lobbyist.
There have been growing questions about his activities after it emerged he used his contacts to lobby Sunak for support for the firm through the government’s Covid Corporate Financing Facility.