Starling pays out fivefold bonus sum despite FCA fine and Covid loan errors

The Guardian

4 days ago

Starling Bank has handed its staff an almost fivefold increase in bonus pay despite an embarrassing regulatory fine and losses on government-backed Covid loans that the digital lender has blamed on its own weak controls.
The digital-only challenger bank paid out £24.6m in bonuses for the 2024-25 financial year, compared with £5.3m a year earlier.
Starling's annual report showed the bank's remuneration committee approved a £600,000 bonus for its highest-paid director – believed to be the chief executive, Raman Bhatia – taking their total pay packet to £1.7m. It paid another £5.4m in bonuses to Starling's board members.
The increase in the overall bonus pot – which paid out in both cash and shares – followed a difficult year for Starling, which was blighted by embarrassing revelations about the bank's internal controls.
The bank reported last week it was taking a £28m loss on its Covid-era bounce back loans (BBLs) after conceding it had lent money to some businesses without proper checks. This meant the loans were unlikely to qualify for the 100% government guarantee, which would have meant taxpayers footed the bill.
Starling was fined £29m by the Financial Conduct Authority in Octoberafter the watchdog discovered 'shockingly lax' financial crime controls at the bank. The FCA said Starling, which emerged in the mid-2010s, had 'left the financial system wide open to criminals and those subject to sanctions'.
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The fine and loan losses ate into the bank's annual profits, which tumbled 25% to £223m for the year to the end of March.
Starling said the latest bonus pot did not take either the FCA fine or the Covid loan losses into account, given that they were 'legacy issues' that did not reflect the staff's recent performance.
'It is important to note that the scheme reflects performance over the past 12 months, which includes the effective management of legacy matters, progress against key regulatory programmes, and the group's broader commercial performance,' a spokesperson said.
They added that a larger number of staff were taking part in its bonus schemes, which included a long-term incentive plan that was paid out in Starling shares.
Bhatia told journalists last week that the bank might consider cutting or clawing back pay from executives over the FCA fine and Covid loan issue. 'We have discharged our duties to consider any impact on [remuneration] where appropriate. I can't share any further details,' Bhatia said.
It was not clear whether that could impact Starling's founder and former chief executive, Anne Boden, who stepped down in 2023 citing a 'conflict of interest' between being a boss and a large shareholder in the bank. Bhatia took the helm midway through 2024.