Reports find that there are extensive ties between british billionaire Sanjeev Gupta’s acquired bank, Wyelands and his family’s wider business empire, the GFG Alliance. This strong link is raising questions over how the bank is appropriating savers’ deposits.
Wyelands, acquired by Gupta in 2016, offers depositors annual savings rates of up to 1.9% on a 24-month fixed term account with a minimum deposit of £5000. However, a Financial Times investigation has shed light on strong connections with Gupta’s GFG Alliance, an international grouping of businesses composed primarily of mining, energy generation, metals, and engineering firms.
Analysts revealed that around 23% of Wyelands’ interest charge profits, about $4.86 million, come from GFG members. While UK financial regulations do permit banks to lend to related parties up to a limit of 25% of the bank’s core capital as long as the terms are not more favourable than unrelated parties, this is not common practice in the country.
“Bank lending to related parties or their customers is not common in the UK,” University of Warwick School of Law Professor Dalvinder Singh explains, “though it is in some other countries like Germany and is very common in Asia”
This suggests that while they are operating within the strict limits of the law, Wyelands may, intentionally or otherwise, be doing so in a way that violates depositor expectations. In the deeply competitive banking industry, the erosion of customer trust is worrisome for established incumbent banks but can be outright lethal for challenger banks who rely on trust and innovation to attract new customers.
Wyelands Bank, like many other challenger banks, primarily focuses its service offerings on a specific niche. In their case, it is lending to small and medium-sized businesses with services like trade finance, asset-based lending and receivables finance. Receivables finance is a common form of business finance where funds are advanced against unpaid invoices prior to customer payment. When an invoice finance house takes a company’s unpaid customer bills at a discount, they often require assets and other elements as security.
A June review of public documents from Companies House, the official UK corporate register, showed that most of the securities registered by Wyelands were held against companies closely linked to the GFG. While official filings are unlikely to provide a representative view of the overall business, the picture that it paints for consumers is likely to bring about additional challenges to an already difficult business model.
Wyelands has made it clear that “All the bank’s lending is determined by its risk appetite which is agreed by the board and in line with the business plan which has been agreed by the regulators. All our lending is consistent with our regulatory approvals.” Due to client confidentiality reasons, the bank would not discuss whether it loaded money to entities within the GFG alliance, or if it had disclosed to depositors that it was lending their money to its affiliates in the alliance. The GFG, however, openly stated that: “It is a matter of disclosed fact that GFG Alliance businesses transact with Wyelands.”
