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The chief executive of Wyelands Bank, which is owned by metals tycoon Sanjeev Gupta, has admitted the lender carried out insufficient analysis of whether it was providing financing to companies related or connected to Gupta’s business empire.

Wyelands has historically claimed that it would operate independently from GFG Alliance, a loose network of Gupta-linked companies generally involved in metals production or commodity trading.

However, allegations have since emerged that Wyelands provided financing to companies that did in fact have links to Gupta, for instance through business associates or former GFG Alliance executives.

Giving evidence on June 28 to a UK parliamentary committee, Wyelands’ Stephen Rose – who joined as CEO in October 2019 – said that a June 2020 review of the bank’s customer base found that “some of the initial connected-party analysis that had been done was insufficient in some respects”.

“In retrospect, the facility should have been set up with more robust safeguards,” he said.

In reality, Rose said, around 80% of the bank’s clients were members or customers of GFG Alliance companies.

He said that as of late 2019 the bank had planned to reduce that exposure, but in September that year, the Prudential Regulation Authority (PRA) imposed restrictions on Wyelands, preventing it from lending to certain parties and limiting its ability to accept deposits.

Those restrictions meant the bank was “not able to roll that out and give additional support to non‑GFG introduced businesses at that point”, Rose said. Only two new clients were subsequently introduced.

According to Rose, the bank’s financial statements would previously define related parties only as companies that shared common ownership or directorship.

But in practice, companies that did not list Gupta as a director or owner could still be considered connected parties if they were dependent on income from Gupta-owned businesses, he explained.

In Wyelands’ case, Rose said customers became increasingly connected to each other as a result of that economic dependency.

He gave the example of Platinum Commodities and BCL Commodities, which were originally classified as businesses not connected to Gupta.

The Financial Times revealed in February 2020 that Platinum is controlled by a former senior executive at Simec – the branch of GFG owned by Gupta’s father – and that BCL Commodities is controlled by a businessman who appears to have been head of trading at Gupta’s Liberty Commodities.

Rose said it emerged in June 2020 that financing facilities extended to those companies were “not operating… in the right way”.

Assets would be sold but the proceeds generated would not be passed back to the bank, he said, in effect creating exposure to the buyer and thereby creating a connection between the companies.

Wyelands is also facing scrutiny over its provision of receivables financing based on uninsured trades.

Argus revealed this week that financing had been made available to GFG Alliance companies Liberty Steel and Liberty Commodities, as well as to external companies, without any insurance cover in place.

Typically, it would be highly unusual to finance uninsured trades for non-investment grade corporates. According to Argus, financing was provided to since-collapsed Phoenix Commodities, as well as companies run by Gupta business associates such as UD Group and UBG Commodities.

Documentation seen by GTR shows Wyelands also provided receivables financing to Liberty on uninsured trade with Viant Commodities, a Singapore-headquartered trader, in early 2018. Viant did not respond when contacted and is not accused of any wrongdoing.

A Wyelands spokesperson tells GTR: “Credit insurance is not always applicable for all clients and is assessed by most banks on a case by case basis, not least because of the conditions attached by the insurer that often restrict the amount of protection afforded by the policies.”

The reason Wyelands was initially subject to regulatory intervention from the PRA was due to concerns over a lack of transparency, said Bank of England governor Andrew Bailey during a committee hearing last month.

Bailey said concerns were “particularly around the connected lending in the context of the ultimate beneficial owner, who is Mr Gupta”.

Those fears were relayed to the National Crime Agency at the time, Bailey said, and in February 2020 evidence gathered by the authority was passed onto the Serious Fraud Office (SFO).

The SFO has since announced it is investigating “suspected fraud, fraudulent trading and money laundering in relation to the financing and conduct” of GFG Alliance companies, including the financing role played by Greensill. It did not mention Wyelands in that statement.

Wyelands’ financial statements for the year ending April 30, 2019, are also the subject of a probe by the Financial Reporting Council (FRC). The accounting regulator announced this week it is investigating PwC, which audited those results.

When contacted by GTR, a PwC spokesperson says: “It’s understandable that there is regulatory scrutiny in situations like this. We will cooperate fully with the FRC in its enquiries.”

Wyelands declined to comment on the investigation.