Bank of England policymakers are concerned rapid growth in unsecured lending to British consumers could endanger banks if credit standards are slipping, the central bank said on Tuesday.
British consumer borrowing grew at its fastest rate in a decade towards the end of last year, and although the pace has since slowed somewhat, last week the central bank said it planned to take a closer look at the risks involved.
On Tuesday, the BoE set out more details of how its Financial Policy Committee reached that decision, and the types of risk involved.
“Overall, the Committee judged that, relative to mortgage debt, consumer credit was less likely to pose a risk to broader macroeconomic stability through its effect on household spending. Instead, the recent rapid growth in consumer credit could principally represent a risk to lenders if accompanied by weaker lending standards,” the BoE said.