Bank of England will go after firms looking to mask risksStaff Writer | July 11, 2017
The Bank of England has issued a warning to major lenders not to repeat like they did before the 2007 credit crisis when they deployed complex strategies to mask the financial risks they were running.
Britain Across the wider market, we are observing...
Referencing the famous phrase of William McChesney Martin, a chairman of the U.S. Federal Reserve in the 1950s, Woods said the Bank is on alert for a “return to the punchbowl”.
“Across the wider market, we are observing – not from all firms, but definitely from a few– a shift in credit risk appetite as lenders compete with each other to find ways of widening the pool of available borrowers, increasing the size of loans available to them, or reducing the credit premium charged for inherently more risky loans,” he said.
Woods’s remarks were initially prepared for delivery in May to the Building Societies Association but delayed because of the purdah period imposed once the general election was called. They were published, in an updated form, on Monday.
In a warning to banks and building societies Woods said the Bank had already found behaviour from lenders that “might meet the letter of the regulation” but is “designed to circumvent the spirit”. ■