Starling Bank is under renewed scrutiny after announcing £28 million in losses from the government’s Covid-19 “bounce back loan” scheme, with CEO Raman Bhatia openly admitting that “weak controls” within the bank were to blame. This means Starling will absorb the losses directly, rather than seeking government guarantees that would have seen taxpayers foot the bill.
The “bounce back loan” scheme was designed to offer rapid financial assistance to small businesses during the pandemic, with the government guaranteeing 100% of defaults. However, Starling’s internal review found that a tranche of loans were granted without proper checks, rendering them ineligible for government coverage. This issue directly echoes previous accusations of Starling’s lax approach to BBLs.
The £28 million BBL loss, combined with a recent £29 million fine for “shockingly lax” financial crime controls, has contributed to a 25% decline in Starling’s annual profits. The bank is now making significant investments in its compliance and risk management capabilities to address these control lapses and ensure future stability.