Are the banks still lending too much?

The global financial crash of 2008 is widely considered to have been the worst financial crisis since The Great Depression of the 1930s.

Banks went bust, unemployment levels rose and many governments embarked upon austerity measures in an attempt to reduce enormous budget deficits the recession had laden their respective countries with. Earlier this year The Bank of England issued a stark warning that banks are still lending out too much and leaving themselves exposed to a shock in the financial system.

Perhaps the most emotive symptom of the recession, however, was the huge wave of public anger that swept across the continent. The banks, a key figure in the crash thanks to reckless lending, were to be bailed out by the taxpayer. Many people are understandably still angry about this 9 years later and now view banks as untrustworthy, unaccountable entities who are to blame for the effects of the recession that are still being felt today.

The question is, have the banks learned their lesson from the recession?

The evidence would suggest not. The recession was essentially caused by careless and impulsive lending on the behalf of bankers to people who had little hope of paying back what they owed. Every time a new loan was authorised, this created money that needed to be paid back, with the total of money owed eventually spiraling out of control to a point where it was impossible to reclaim what had been loaned out. British taxpayers alone have spent over £1.1 trillion to bail out the banks since the recession happened, and there are ominous signs that the banks may be repeating the same mistakes that caused the financial meltdown of 2008.

Earlier this year The Bank of England issued a stark warning that banks are still lending out too much and leaving themselves exposed to a shock in the financial system. Recent figures show that consumer credit in the UK has risen at a rate of 9.8% because of a boom in credit card and other unsecured loans, with the risk of this being a potential loss of £30bn if loans are unable to be repaid. Banks have consequently begun to set aside excess capital in the event of another economic shock, but such a rise in lending is a worrying sign considering the calamitous repercussions of the recession.

How can we protect ourselves?

To protect yourself and your assets at a time such as this, it’s vital that you carefully consider loans banks may offer you before entering into an agreement with them. Is there a reasonable amount of interest on what you’re being offered? Are the repayments they’re requesting likely to be paid on time? Do you really need the loan? Asking yourself such questions is critical to your financial well-being in a time where it seems the banks haven’t fully learned their lesson.

However, if you have already found yourself in difficult circumstances due to issues such as property debt, or owe a large amount which is putting your assets at risk, it is worth taking a no obligation, impartial, free consultation here at Bell & Company. Call us today – 02895217373

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