The delicate balance of lending

The Bank of England’s decision to simplify its lending licensing process has encouraged more competition into the banking market. This is a welcome initiative to rejuvenate the credit industry. As new entrants flood the market and strive to gain a slice of the loans market, the Bank of England must work closely with the FCA and PRA to provide firmer guidelines on lending policy. Meanwhile, banks must take control of their own systems to get a holistic view of their exposures. What’s imperative is that the banks don’t lose focus on responsible lending. 

Extending lines of credit remains a delicate balancing act for banks and non-bank lenders alike. In the aftermath of the financial crisis and with regulations such as Basel III on the horizon, many institutions remain reluctant to lend. High street incumbents often have the capital to issue loans but lack confidence in their own lending policies. The result is an overly conservative approach that stifles economic growth. 

In order to lend confidently and pump much needed cash into the SME and commercial sector, banks must take control of their lending processes. They must put their own lending policies under the microscope and ensure they stand up to inevitable regulatory scrutiny. Without the appropriate systems in place, irresponsible lending may once again tip the scales.