The Bounce Back loan program the British government launched in May to spur England’s economic recovery from COVID-19 has been beset with fraud and poor-quality loans that could cost taxpayers as much as $35 billion, the Financial Times reported.
More than a dozen people familiar with details of the $58 billion program and the assessments were in many cases gloomy or worse.
The experts and banking insiders’ comments — some with attribution, some without — included: “The scheme was being abused and defrauded on an industrial scale;” “In 10 years’ time, people will still be looking for the money;” “The period from April to June was essentially a giant bonfire of taxpayers’ money, with banks just handing out matches;” and “People saw it and thought, ‘wow’! Why on earth wouldn’t they take it? It’s basically free money.”
The program almost invited fraud by setting minimal standards for receiving loans, the paper reported. Borrowers were required to do little to show they were likely to be able to repay them.
Experts warned that the underwriting was weak not only for individuals, but also for corporate borrowers. In the case of corporate lending, the criticism began soon after relief programs for businesses were launched in the late winter.
The risk of losses experts discussed with the Financial Times was more severe than the figures the the British government put forth in late September. In a report to the public at the time, the government estimated losses from COVID-19-relief programs could be as bad as $30 billion.
The Bounce Back program was designed to provide loans of up to $65,000 to small-business borrowers with a repayment period of around nine years. By October, some business owners were complaining that major banks no longer were arranging the loans, even though the British government bore the risk.
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