BOE’s Brazier Sees Lenders ‘Dicing’ With Spiral of Complacency
- Car loans, credit cards and mortgage lending cited as risks
- Stress testing, lending curbs are among key defenses
Banks’ bigger capital buffers mean they are much better prepared for a downturn than before the crisis, and the risks from car loans and credit cards could still easily be absorbed.
Photographer: Simon Dawson/BloombergU.K. lenders may unwittingly be taking on more risk after years of low defaults and falling unemployment, according to a new warning from the Bank of England about the threats to the economy from rampant credit growth.
Booming car-loan growth, extended interest-free periods for credit cards and an easing of mortgage standards have created a “pocket of risk” that may weaken the financial system if it gets out of hand, Executive Director Alex Brazier said in a speech in Liverpool, England. But better regulation will prevent any surge in losses from disrupting the economy as a whole, he said.