The status of UK personal loan business

This year there is many events occur in United Kingdom. Carney will release a semi-annual report of the Bank of England’s financial stability, which could force major banks in Britain to raise their current capital levels. After Britain chose to leave the European Union, the Bank of England immediately injected liquidity into the banking industry and announced a package of emergency measures. And any move to raise banking capital is a direct counter-move after the above move. In addition, it is expected that Carney will also be asked about the relevant issues in the United Kingdom’s exit from the EU.


Data show that in the fierce competition among credit banks and personal loans businesses in major UK banks, the year-on-year increase in consumer credit hit a 10% high level in nearly 10 years. The rapid growth of borrowing and debt levels may prompt the Bank of England’s Financial Policy Committee to reexamine the current countercyclical capital buffer ratio. After the Brexit vote, the BOE’s ratio was cut from 0.5% to zero to enhance the bank’s ability to borrow from households and businesses. Credit Suisse analysts expect the Bank of England or the current financial stability report will counter-cyclical capital buffer ratio raised from zero to 0.5%. The Bank of England or will also be committed to a moderate suppression of credit growth, especially consumer credit.


British banks must prepare another 10 billion pounds to prevent the resulting losses. The Bank of England’s Financial Policy Committee said today that consumer credit could be as much as 30 billion pounds in losses under its pressure test of rising interest rates and rising unemployment, up from £ 10 billion over the previous estimate. The Bank of England also added that it will closely observe the potential for the Brexit process to undermine its financial stability, including a contract worth £ 20 trillion in derivatives. Although the FPC also said there is no substantial risk to economic growth from rising borrowing levels, the Bank of England’s Prudential Regulation Authority (PRA) will urge banks to prepare another 10 billion pounds of capital to cushion them. Each bank will be reviewed by regulators, while Barclays and Lloyds, which have the most consumer credit, are expected to suffer the most. The Bank of England has expressed its deep concern over the rapid growth in consumer borrowing in a weaker economy. Today, FPC said: “In a benign local credit environment, there is a certain risk of rapidly growing consumer credit.” And the rise in personal borrowing, in particular, threatens financial stability. Compared to large, secured mortgage lending markets, small, unsecured consumer credit can make banks more vulnerable. The Bank of England also today warned of the threat of financial stability by Brexit, saying the Brexit process could endanger the 25% derivatives contracts of UK and EU customers at a value of 20 trillion pounds. If the reciprocal agreements between the EU and the UK market come to an end, although in theory these contracts can be transferred from one jurisdiction to another, such a huge scale may make it impossible for them to be completed within a short period of time. FPC said: “In these areas, the company’s own transfer of complex and difficult task.” Some companies use interest rates or currency exchange derivatives contracts hedging risk. Barriers to use will undermine the company’s ability to hedge its risks and increase its risk of impaired market volatility.