Bank of England issues a strong debt alert
Written by JDPGlobal | Thursday, 30 June 2005
England is in the midst of a debt heap, with the Bank of England reporting that household debts, including mortgages, totalled more than £1 trillion ($1.83 trillion).
The economists fear a 'dynamo effect' because of the increasing loans, which could leave the economy in tatters and take the burden of debt beyond the limits of the borrower.
Some consumers and financial institutions are continuing to increase their levels of indebtedness and this has worried the bank of a mounting vulnerability, which could lead to personal bankruptcy and company insolvency.
A Financial Stability Review published by the bank pointed out that near-term risks had stayed low since the last review in December, as well as a slow overall lending growth. Companies with a high level of debt are vulnerable in the event of a slowdown in economic activity, the report said.
It also warned of sizeable overseas exposure to households and firms in the US, to banks in Europe, and to residential property in Hong Kong.
However, experts opined that this could be because some lenders were becoming more cautious and were tightening standards for unsecured lending.
