More than £1bn of taxpayer-funded loans made beneath the UK authorities’s Covid “bounce back” scheme have been recognized as doubtlessly fraudulent, in accordance with official information revealed on Monday.
UK banks have additionally claimed or obtained £3.8bn in authorities cash to cowl defaults beneath the scheme — an indication of the huge quantities that can be wanted to cowl the emergency loans made to small companies within the first months of the pandemic.
The information, a part of a brand new dashboard of financial institution efficiency on bounceback loans, for the primary time revealed which banks have the most important publicity to default and fraud beneath the scheme. It will increase contemporary questions on whether or not they need to have accomplished extra to weed out fraudsters earlier than giving out state-backed loans.
As incoming prime minister Liz Truss prepares a large monetary assist package deal to assist struggling households deal with hovering vitality payments, the size of the losses can be a reminder that the federal government remains to be overlaying the prices of the pandemic.
Under the bounceback scheme, government-backed loans value greater than £46bn got to corporations with solely gentle checks on eligibility to encourage banks to lend rapidly.
However, billions of kilos are actually feared misplaced to fraudsters, with official estimates as excessive as nearly £5bn.
Banks have been criticised by ministers for not doing extra to cease fraud within the scheme and, extra just lately, for not pursuing corporations to recuperate taxpayers’ money.
Bank executives reject the accusations, arguing that they have been merely following guidelines set out by the Treasury to lend to struggling corporations as rapidly as doable.
Of the £3.8bn to cowl mortgage defaults, £1.2bn has already been paid to the banks by the Treasury, with about £263mn of this overlaying suspected fraudulent loans.
Lenders have reported that loans value an additional £3.2bn are in arrears, and an additional £1.4bn value have now defaulted.
The authorities information additionally confirmed that £28.3bn of loans have been being repaid on schedule, whereas an additional £4.7bn had been totally repaid.
Government effectivity minister Jacob Rees-Mogg on the weekend wrote to Starling Bank asking how it could recuperate money misplaced beneath the scheme. Starling’s whole worth drawn beneath the scheme was £1.6bn, of which greater than £600mn is both in arrears, default or has been claimed in opposition to and settled. It has recognized £92mn in suspected fraud.
Starling mentioned that it “took a strong and proactive stance to protect taxpayers’ money, as well as to support our customers and help them repay their loans”. It described “direct comparisons between Starling Bank and other lenders” as “difficult, given limitations of the data and the different characteristics of each lender’s customer base”.
Almost a 3rd of the loans made by Tide, one other on-line financial institution, have additionally been paid out beneath the assure, whereas about half of the mortgage e book of New Wave Capital has been settled.
More than £450mn of the £1.4bn lent by Metro Bank can be in arrears, default or has been claimed in opposition to and settled.
Metro mentioned that “although it is too soon to draw concrete conclusions we can see data beginning to normalise and expect to see Metro Bank’s position align to our overall contribution to the BBLS scheme over time”.
It added that it “understood [its] responsibilities under the programme and at all times complied with the spirit and rules of the scheme [taking] a rigorous approach to detecting fraudulent BBLS loan applications.”
The largest quantities of suspected fraud have been flagged by Lloyds and Barclays, at £304mn and £259mn, respectively, however these banks even have two of the most important bounce again mortgage books at £8.5bn and £10.7bn. Barclays, the most important lender beneath the scheme, has additionally claimed or had its claims settled on greater than £1bn of loans.
“We continue to proactively tackle BBLS fraud, and we are committed to the identification, escalation and recovery of fraud within the schemes — compliant with the requirements of the Government Lending Schemes,” mentioned Barclays.
Tide, Lloyds and New Wave Capital didn’t instantly reply to a request for remark.
Source: www.ft.com