Starling Bank is reeling from accusations from former Conservative minister Lord Agnew that the bank used the Government's Covid loan scheme as a "God-sent opportunity" to swell its balance sheets without conducting adequate checks on the ability of loanees to repay the debt.
Introduced to cover the devestating effects of the Pandemic on small busines, the bounce back loan scheme relied on UK banks to distribute £47 billion pounds of taxpayer money to distressed businesses, backed by a 100% Government guarantee that it would cover the losses if borrowers failed to repay.
Agnew, who quit as the anti-fraud minister in January over the government’s “woeful” efforts to control fraud, singled out Starling Bank as one of the worst offenders when it came to validating the turnover of businesses or submitting suspicious activity reports.
“With minimal data, I cannot analyse the full extent of the misdemeanours, but I’d like to call out one of these banks that I believe has acted against the government’s and taxpayer’s interests: this is Starling Bank,” he said.
Agnew pointed that prior to the pandemic, Starling had only lent £23m. By June 2021, according to a company trading update, it had distributed £1.6bn worth of bounce back loans.
The bank disbursed a further £640m under the larger Coronavirus Business Interruption Loan Scheme, which offered up to £5m per borrower.
“It seems to me that they took this as a God-sent opportunity to swell their balance sheet by a factor of 50 times in barely less than a year, with no risk to themselves and 100% risk to the taxpayer,” Agnew said, billing the bank's actions as a “cost-free marketing exercise to build their loan book and so their company valuation”.
Starling's Anne Boden expressed shock at the attack on her business and asked Agnew to withdraw his remarks.
“The comments raised by Lord Agnew about not checking the turnover of businesses or submitting suspicious activity reports are absolutely and utterly wrong and I must ask him to withdraw the statement,” she says, pointing out that the bank had introduced extra checks and had excluded all non-active companies from accessing the scheme.
“I agree with Lord Agnew that we must protect taxpayer’s money”, Boden says. But “directing his anger at Starling is just wrong - we were the bank that was singled out for criticism by Treasury officials, ministers and MPs, for rejecting so many potential fraudsters”.