FSA Warn Further Credit Problems On The Way

by Stewart Douglas

Story link: FSA Warn Further Credit Problems On The Way

The Financial Services Authority has today cast further doubt over the state of secured credit in the wake of the sub-prime sector collapse, suggesting banks should brace themselves for continuing problems in the lending market in terms of preparing liquidity and reassessing asset value.

In a report released today, the Financial Services Authority suggested that there was a ‘very real’ threat to outstanding mortgages as a result of the continuing decline of the global credit environment in the wake of the summer credit crunch.

The financial services regulator said that businesses with mortgage linked securities and mortgage lenders themselves should be wary of the potential for further problems in secured debt as the global credit crisis continues to spiral downwards over the coming months following the initial problems caused by the sub-prime collapse..

The credit crunch, which has created an environment of hostile lending at steep rates, only to perpetuate the lack of credit availability, has already caused problems for several major lenders, and could continue to do so over the coming twelve months according to the announcement made today.

Warning that the mortgage market in the UK may be badly hit by the credit crunch fallout, seeing growing defaults and further credit problems, the FSA told banks to prepare for the worst over the coming months, particularly increasing defaults and repossessions.

The announcement today told banks and company’s with substantial mortgage linked investments to brace themselves by reanalysing their current liquidity positions, with a view to funding any further drout in credit repayments.

The news comes along side a proposal from the FSA that customers in default, preparing for repossessions, should be treated courteously and fairly in the circumstances, alongside overarching policy at the organisation.