On balance, we believe that some current lending practices do risk sowing the seeds of future credit quality problems for banks. Chief executives and boards should be considering carefully whether the additional point of market share that might be won now by lending to marginal propositions is worth the pain of future losses, the resources needed for loan workouts, and so on.
They should also be alert to the possibility that the household sector might feature more strongly in the next upswing of losses. Household debt has increased a good deal more quickly than incomes in recent years.