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BoE warns banks as consumer debt spirals

Tuesday, July 25, 2017 - 01:33

The Bank of England says it could force banks to hold more capital as an ''insurance policy'' to protect the wider economy in case the rapid growth in consumer credit turns sour, a senior official warning of a continuing 'spiral' of debt. Laura Frykberg reports.

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The rule of the regulator could return. The Bank of England warning it may force banks to hold more capital, in the wake of rapidly rising consumer debt. The BoE says while lending has grown in line with the British economy, outstanding car loans, credit card balances and personal loans have increased 10 percent, outpacing rises in income. SOUNDBITE (English) OANDA SENIOR MARKET ANALYST, CRAIG ERLAM, SAYING: "This is something which the Bank of England is going to have to focus on should things take a turn for the worse. We don't want to find ourselves in a position where consumers are feeling a large brunt of the pain which could deliver a substantial amount of harm to the UK economy." It's the latest move by the BoE to bolster banks. It's already increased regulation with closer supervision, tightening of mortgage lending, and tougher stress tests. Perhaps in a bid to stop history repeating itself. SOUNDBITE (English) OANDA SENIOR MARKET ANALYST, CRAIG ERLAM, SAYING: "We've seen plenty of examples prior to the 2008 financial crisis of consumer debt rising quite rapidly during periods of economic prosperity. Wages remaining low at a time when unemployment was high and still the economy was continuing to be supported by the consumer. " A warning by the IMF could only add to the BoE's concerns. Its revised down its 2017 forecast for GDP growth...by 0.3 percentage point to 1.7 percent. Citing weaker-than-expected activity in the first quarter.

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BoE warns banks as consumer debt spirals

Tuesday, July 25, 2017 - 01:33