Over a third of bounce back loans approved by Starling Bank during the pandemic are at risk of default, the lender has told the Public Accounts Committee.
Starling Bank funded more than £358m of loans under the coronavirus business interruption loan scheme (CBILS) and over £1bn in BBLs.
Of the £47 billion provided in loans through the Bounce Back Loan (BBL) scheme, £1.1 billion of these loans are suspected to be fraudulent. 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.
So far lenders have clawed back £400 million from the taxpayer to cover loan defaults under the scheme. Starling has so far claimed £153 million from the state guarantee, of which £106m has been paid out.
Starling Bank CEO Anne Boden in June threatened legal action against former anti-fraud minister Lord Agnew over his allegations 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.
The latest at-risk figures revealed by Starling boss Anne Boden are far higher than those of other banks who appeared before the Committee.
Starling maintains that a large proportion of its BBLS customers were relatively ‘young’ businesses, which have a higher probability of failing than more established businesses. Many of the big banks lent only, or primarily, to their existing customers with whom they may have had a long-standing relationship.
Boden told the Committee that Starling had rejected around £344m worth of BBL applications, equating to about 16 per cent of applications.