Starling CEO admits bounce bank loans ‘not performing’
Starling Bank chief executive Anne Boden has told the public accounts committee that 34.3 per cent of the state-backed bounce back loans (BBLs) it issued during the pandemic are “not performing” and are at risk of default.
The admission follows criticism by the government’s former counter-fraud minister Lord Agnew during the crisis, who said the bank had failed in its counter-fraud duties.
Boden told the committee that Starling had rejected around £344m worth of BBL applications, equating to about 16 per cent of applications, inferring that the bank’s fraud detection systems were adequate.
Starling Bank funded more than £358m of loans under the coronavirus business interruption loan scheme (CBILS) and over £1bn in BBLs.
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According to The Times newspaper, the proportion of defaults anticipated by Starling significantly outstripped those anticipated by other banks who appeared before MPs at the same hearing.
HSBC UK commercial banking head of lending Karl Reid said roughly 17 per cent of the bank’s loans were either in default or in arrears, while Natwest managing director of business banking Andrew Harrison claimed 88 per cent of the bank’s loans were either fully repaid or would be paid back on time.
Paragon Bank managing director Dave Newcombe said that just two of its 139 loans were in arrears.
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Starling’s latest default figures are also significantly higher than those published by the British Business Bank (BBB) in September, which stated that around 18.8 per cent of Starling’s total outstanding loans were in default, while 11.6 per cent were in arrears.
A spokesperson for Starling told The Times: “We were heavily criticised in the media and by officials for declining too many [loan applications] and told our decline rate was much higher than at other lenders. This happened because our fraud detection was, and still is, so good.”
Across the entire scheme, the BBB found that around 3.2 per cent of outstanding loans were in default and 7.6 per cent were in arrears.
Figures published by the business department in September identified £1.1bn of apparent fraud in the scheme and showed that lenders had claimed back £400m from the taxpayer under the guarantee.
Starling has claimed £153m on the state guarantee, of which £106m has been paid out.
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