Banks Warned Against Excessive Lending

The Bank of England is getting worried about the level of household debt.

In a recent speech in Liverpool, Alex Brazier, director for financial stability at the Bank of England, said that “in expanding the supply of credit, [lenders] may be placing undue weight on the recent performance of credit cards and loans in benign conditions”. Brazier highlighted the Bank’s worries about reckless lending which could place the economy into trouble.

Safeguarding Against Debt

Consumers were willing to take on more debt to fund spending in the months immediately following the EU referendum, as Brazier pointed out that while household incomes had grown by just 1.5% over the last year, personal loans, car loans and credit card balances had risen by 10%. Lending terms and conditions have become easier despite official interest rates barely changing which may have contributed to the increase in borrowing. Brazier then said that banks and building societies are being supervised, and were also being required to prove they had safeguards in place to cope with financial stresses and ensure they were resilient against losses on their loans.

The Guardian has more on the Bank of England’s worries about consumer lending.