The Bank of England (BoE) has criticized complacent lenders after growing levels of personal debt have put the U.K. economy at risk of another economic downturn.
The central bank's financial stability director said banks, credit card companies and car loan providers risked slipping into a "spiral of complacency" by assuming risks to the U.K. economy are receding when in fact they are growing.
Outstanding credit card balance transfers and personal loans in the U.K. grew 10 percent in the past year, while household incomes rose by just 1.5 percent. This disparity risks lenders going from "responsible to reckless" as consumers become increasingly unable to meet loan repayments, Alex Brazier said during a speech to the University of Liverpool's Institute for Risk and Uncertainty.
"The spiral continues, and borrowers rack up more and more debt. Lending standards can go from responsible to reckless very quickly," the BoE's Brazier warned Monday.
"The sorry fact is that as lenders think the risks they face are falling, the risks they - and the wider economy - face are actually growing."