The boss of the body handing out £775 million of government funds to boost competition in banking is facing a conflict of interest row after it emerged she is long-standing friends with the chief executive of one of the biggest recipients.

Starling Bank was awarded £100 million from the Banking Competition Remedies board two weeks ago, an award that rivals found highly surprising given its short track record. It was founded in 2014.

Starling chief Anne Boden is a close friend and business associate of the BCR’s Aidene Walsh, who has worked for Boden several times over the past 15 years, including for Starling itself.

The pair go back to at least 2004, when they worked at ABN Amro, then later at Royal Bank of Scotland.

At RBS in 2008, Boden appointed Walsh to run transaction management across western Europe. Walsh was a consultant at Starling for five months in 2017.

One former colleague said: “They were close. Aidene was her trusted lieutenant.”

The BCR is already under fire for handing the biggest chunk of the funds, paid out by Royal Bank of Scotland as part of the terms of its 2008 government bailout, to Metro Bank.

Metro got £120 million despite admitting to accounting irregularities that have left it under investigation by City watchdogs.

Rival banks say the BCR process looks increasingly shambolic. Some say Walsh should resign.

Godfrey Cromwell, the old Etonian chair of the BCR, said: “Aidene’s wide banking experience is an asset to BCR. The board is aware of past contact with Anne Boden of Starling and acted appropriately in recording and managing this.

“Aidene was one member of the five-person board that collectively made the decision of which bids to support.” The BCR says the pair “remain friends” but have not been in contact recently.

Starling admits it was so worried about the situation that it wrote to Lord Cromwell last summer, two days after Walsh’s appointment.

The letter, the contents of which have been seen by the Standard, expressed Starling’s concern that there could be “a potential conflict of interest” and requested “an explanation as to how this situation will be dealt with”.

The bank seemed to assume that Walsh’s appointment meant it would not be allowed to receive any of the funds.

The BCR stated in reply that it was satisfied that their “director selection and bid evaluation processes address robustly the issues that you raise”.