Digital bank Starling has committed to absorbing £28 million in losses from the government’s “bounce back loan” scheme, with CEO Raman Bhatia candidly admitting that the bank’s own “weak controls” during the loan application process were responsible. This decision means Starling will not seek government guarantees, preventing taxpayers from covering the bill.
The BBL scheme was designed to provide rapid financial assistance to businesses during the pandemic, with the government initially guaranteeing 100% of the loans. However, Starling’s internal review concluded that some loans were issued without meeting the necessary procedural requirements, thereby disqualifying them from the government guarantee. This directly addresses past accusations of lax oversight in their BBL distribution.
The £28 million BBL hit, coupled with a recent £29 million fine for shortcomings in financial crime controls, has significantly impacted Starling’s financial performance. The bank’s annual profits have fallen by 25% to £223 million. Moving forward, Starling aims to strengthen its internal processes and compliance frameworks to avoid similar issues and ensure sustainable growth.
