The sudden jump in loan losses, including credit cards and mortgages, came against a relatively benign economic backdrop, said The Telegraph, but greater regulatory pressure over the distorting effect of forbearance had fuelled the figures.
The Bank, the Financial Services Authority and the International Monetary Fund all raised concerns about the misuse of forbearance at that time, with a particular focus on commercial property.
The concern centred on the issue that relaxing the repayments terms for struggling borrowers was painting a false picture of the health of UK bank balance sheets.
In Q2, UK lenders wrote off some of the highest numbers of corporate loans ever recorded according to Bank of England figures, as loan write-offs almost tripled to £2.94bn.
The only time the level of losses had ever come close was in the fourth quarter of 2009, as Britain was emerging from recession, when write-offs were £2.5bn.
For the three months to June, total sterling write-offs were £5.1bn, up from £3.2bn in the first quarter.
Agreeing write-offs cleanses a bank’s balance sheet but reduces the amount of capital against which they can lend on mortgages and other credit.
The largest quarterly hit came in the final three months of 2009, totaling £5.8bn.
Total household debt has dropped by £8bn to £1.45tn in the past year, roughly in line with the amount of personal debt lenders have cancelled.
Last week, Lloyds Banking Group revealed a four-fold increase in mortgage loan impairments for the nine months to September of £416m in its interim report and lending worth £38bn to borrowers in negative equity.
