Bank of England renews warnings to lenders over fears of rising consumer debt

The warning comes despite Bank’s own latest survey of lenders published last week that revealed the amount of unsecured credit made available to consumers had significantly reduced during the fourth quarter of 2017.

The Bank’s Credit Conditions Survey for the final three months of last year reported that unsecured consumer credit growth dipped to 9.1 per cent in November from 9.5 per cent in October, 9.8 per cent in September and 10.0 per cent in August, and is down from a peak of 10.9 per cent in November 2016.

However, the BoE has this week again issued a warning over rising consumer debt after a new Prudential Regulation Authority review of consumer lending – covering credit cards, personal loans and car financing over the first half of 2017 – found executives were receiving inadequate information and may be missing warning signs along the way.

The letter to banks said: “Our main finding concerns weakness in management information and governance.”

The watchdog stressed that “more systematic reporting” will be needed for banks that rely heavily on consumer credit. It comes just months after the Bank’s Financial Policy Committee claimed lenders were “underestimating” the risks of growing household debt.

It said lenders were using the wrong benchmarks and placing too much weight on how consumer lending portfolios affected firms under “benign conditions”, which could change under economic or financial stress.