BOE FPC: Consumer Credit Risk; Banks Need Stg10bn New Capital>

     LONDON (MNI) - The Bank of England's Financial Policy Committee 

(FPC) said that while overall domestic credit growth is benign rapid 

unsecured consumer credit has created a pocket of risk. 

     The FPC wants banks to build extra capital to protect against 

the threat of a marked deterioration in the consumer credit environment. 

The FPC has called on banks collectively to increase capital by stg10 

billion, with individually tailored plans for each bank.

     The extra capital would be used to cover any potential losses made 

in an economic downturn, current underestimated by banks according the 

 FPC.  

     Overall UK domestic credit growth has been in line with growth in 

nominal GDP, with the FPC judging in its policy statement that overall 

risks are at a standard level. 

     Unsecured consumer credit, however, has risen by around 10% 

annually, but it only represents around 11% of overall household debt. 

The FPC said the risk rapid consumer credit growth posed was not to the 

overall economy, as consumer spending growth has not been credit driven. 

     The risk instead lies with the banks extending the unsecured 

credit, which led the FPC to put pressure on them to boost capital. 

     Dealership car finance has seen the most rapid growth, of around 

14% over 12 months, with strong growth also seen in credit card lending. 

     The FPC left the countercyclical capital buffer at 0.5% but said it 

envisaged raising it to 1% in November. 

-London newsroom: Tel+44 203 856 2226; email: 

jamie.satchithanantham@marketnews.com; david.robinson@marketnews.com 

[TOPICS: M$$BE$,MT$$$$]