Bank of England gets tough on lenders over credit risk-taking

Firms will have until September to respond


The Bank of England has told lenders to prove they are not taking on too much risk in the latest step of its crackdown on soaring consumer lending.

The Bank's Prudential Regulation Authority (PRA) has ordered firms to provide details by September as it tightens up scrutiny of the sector.

It follows last week's warning from Governor Mark Carney that lenders were "forgetting the lessons of the past", with the Bank's raising the alarm over signs of more lax lending controls and ballooning borrowing.

The PRA, which has the power to force firms to rein in lending, said it was "requesting evidence from all firms with material exposures to consumer credit" of how they are protected against risks of consumer arrears.

Firms will have until September to respond, when they will also see the stress tests for losses on consumer credit lending, which has been brought forward from November.

It comes after the Bank announced in last week's financial stability report that it will force banks to put aside another £11.4 billion over the next 18 months.

The Bank said it was concerned 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.