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BOE Says Consumer Defaults Could Exceed Banks' Estimates

  • Some banks may be underestimating potential losses in downturn
  • Consumer credit growth not a material risk to growth outlook
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The Bank of England said rapid gains in consumer credit could cause U.K. banks to suffer bigger losses than they’re expecting if the economy weakens.

“Lenders overall are placing too much weight on the recent performance of consumer lending in benign conditions as an indicator or underlying credit quality,” the BOE’s Financial Policy Committee said on Monday. “As a result, they have been underestimating the losses they could incur in a downturn.”