Bank of England to take steps on ‘spiral of complacency’

THE Bank of England could take further steps to protect the UK economy amid signs high street banks are edging towards a “spiral of complacency” when it comes to consumer lending.

Alex Brazier, executive director of financial stability, has hinted that the Bank may ask lenders to raise their capital buffers even further come September if concerns over the growth of consumer debt persist.

In a speech to the University of Liverpool’s Institute for Risk and Uncertainty, Mr Brazier said: “We have already, in recent months, taken steps to strengthen banks’ defences against losses by raising the capital buffers they are required to hold on all their lending.

“And to make sure this defence line is kept robust in the face of rapid consumer credit growth, we are accelerating this year’s test of banks’ consumer credit loans.

“By September, we will have assessed whether the rapid growth has created any small gap in the line. If it has, we’ll plug it.”

Soaring inflation triggered by the Brexit-hit pound has put household spending power under sustained pressure since the start of the year, with the amount spent on credit cards increasing as disposable incomes fall.

The Bank has already raised concerns over surging levels of unsecured consumer borrowing on credit cards and car finance, which is rising by more than 10% a year and outstripping incomes. Mr Brazier, who is also a member of the Bank’s Financial Policy Committee, said lenders may become complacent during brighter economic times.