Starling Bank Faces Criticism After Fivefold Bonus Increase Despite Regulatory Fine and Loan Issues

Starling Bank has come under intense scrutiny after awarding its staff a significant increase in bonuses, despite facing regulatory penalties and profit challenges. The digital-only challenger bank announced a total bonus payout of £24.6 million for the 2024-25 financial year, nearly five times the £5.3 million distributed the previous year.

The sharp rise in bonuses includes a £600,000 payout to the bank’s highest-paid director, believed to be the CEO Raman Bhatia, raising their total remuneration to £1.7 million. Starling Bank’s board members also received £5.4 million in bonuses. The remuneration committee defended the decision, stating that the increase reflects the efforts of staff over the past year and their effective handling of longstanding challenges.

However, the bank’s bonus scheme has raised eyebrows following a series of setbacks. The Financial Conduct Authority (FCA) fined Starling £29 million in October for “shockingly lax” financial crime controls. The FCA highlighted failures that left the financial system vulnerable to misuse by criminals and individuals under sanctions. These issues were compounded by a £28 million loss on government-backed Covid bounce back loans, attributed to insufficient checks on businesses applying for loans.

The setbacks significantly impacted Starling’s profits, which fell by 25% to £223 million for the financial year ending in March. Despite these financial difficulties, the bank maintained that its bonus programme is based on performance over the past year and does not account for these “legacy” issues. A spokesperson for Starling clarified that the enhanced bonus scheme rewarded employees’ contributions to regulatory progress, legacy issue management, and the bank’s broader commercial performance.

Bhatia, who assumed the CEO role midway through 2024, hinted at the possibility of executive pay cuts or clawbacks in light of these challenges. He stated that the bank had considered the impact of recent difficulties on executive remuneration, though details remain unclear. The founder and former CEO, Anne Boden, who stepped down in 2023 to avoid a “conflict of interest” as both a major shareholder and leader of the bank, is unlikely to be affected by these measures.

While Starling Bank’s dramatic bonus increase has sparked controversy, the organisation continues to highlight its recent achievements, including addressing past regulatory issues and ongoing business performance improvements. Starling’s actions will likely remain under close scrutiny as both public and private stakeholders consider the balance between executive incentives and organisational accountability.