Starling Bank’s chief executive, Raman Bhatia, has taken direct responsibility for £28 million in losses incurred from the government’s Covid-19 “bounce back loan” scheme, openly admitting that “weak controls” within the bank were to blame. This candid confession means Starling will not be seeking government guarantees for these losses, thereby sparing taxpayers the financial burden.
The BBL scheme was designed to provide rapid financial aid to small businesses during the pandemic, with taxpayers underwriting 100% of any defaults. However, Starling’s internal investigation revealed that some loans were approved without proper adherence to the scheme’s protocols, making them ineligible for the government’s guarantee. This issue has resurfaced a long-standing controversy surrounding Starling’s administration of these loans.
The £28 million BBL loss, coupled with a recent £29 million fine for deficiencies in financial crime controls, has significantly eroded Starling’s profitability. The bank’s annual profit for the year to March has dropped by 25% to £223 million. This period represents a critical juncture for Starling as it works to rectify past errors and restore confidence among regulators and the public.