Increased “lender forebearance”, whereby banks allow borrowers to extend the repayment period for their debt, switch a repayment mortgage to an interest-only product, or allow a holiday on interest payments, pose a risk to British banks, it said.
The ratings agency’s said in a report the practice was a “credit negative” for the country’s banking system.
“It is a concern,” said Elisabeth Rudman, a senior credit officer at Moody’s.
Last week, the FSA’s risk outlook report for the financial system also drew attention to the issue.
FSA figures show that for every UK mortgage borrower in arrears, two are subject to some kind forebearance process to help them avoid defaulting on their debt.
Lloyds to get £15bn loan to aid branch sell-off
Citigroup and JPMorgan are set to provide a £15bn loan to support Lloyds Banking Group’s disposal of 600 branches, the Financial Times reports.
The funding will bridge an estimated shortfall between mortgages and customer deposits of between £20bn and £40bn, of which Lloyds itself will provide at least £5bn.
However, the shortfall is expected to shrink to £20bn by the time a sale is completed in two years.
The sale of the branch portfolio, which has an estimated value of £2bn and represents 19% of the UK mortgage market and 5% of the country’s personal current accounts, is a key test of the bailed-out bank’s ability to comply with the terms of a European Union state aid ruling, made following its part-nationalisation.
MPs probe corporate tax avoidance
The Treasury Select Committee (TSC) is to investigate corporate tax avoidance amid public pressure for action on companies seen as paying less than their fair share.
Senior executives face the prospect of explaining their companies’ tax structures to the committee in the inquiry, the Guardian reports.
George Mudie, the Labour MP for Leeds East and the chairman of the Commons Treasury sub-committee, says there is growing public interest in tax avoidance.
“When people see their standards of living fall and are paying their tax, and see huge salaries and questions over tax avoidance, then quite rightly they are interested in the issue,” he says.
