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Bank of England warns banks about risky lending

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Staff Writer | April 5, 2017
UK banks
Britain   Living costs

A surge in consumer lending means British banks are at risk of incurring losses, the Bank of England (BoE) said.

It is warning that some might be letting credit standards slide as they compete to offer debt to households.

Consumers ramped up their borrowing by more than 10 percent late last year, the fastest growth in a decade, which helped drive strong economic growth despite June's vote to leave the European Union. Rates of saving fell to their lowest in more than 50 years.

But the economic outlook is now darkening as households face rising living costs in the wake of sterling's tumble against the dollar and the euro, and wage growth is expected to remain below its long-run average.

Last week the BoE said it was taking a closer look at consumer borrowing, and on Tuesday it gave more details.

"An easing in credit supply conditions appeared to have contributed to the growth in consumer credit, with intense competition in some segments of the market," the BoE said in a summary of the latest meeting of its Financial Policy Committee, which looks at financial stability risks.

Credit card companies were offering longer interest-free periods to entice borrowers, while other lenders were offering larger unsecured loans and had cut the interest rates they charged by more than for less risky mortgage rates.


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