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UK Credit Risk Climate: Can Cheap Money Beat the Profitability Paradox?

The big financial news in the UK today is that the Bank of England will give around £80 billion to UK banks at below-market rates, for them to lend to consumers and businesses.  The government expects this “funding for lending” scheme to expand lending, thereby stimulating the economy and helping to lead the UK out of its current recession (or, as the government puts it, “the present period of heightened uncertainty”). 

It will be interesting to see the banks’ response, since the risk of the new loans stays with them, not the government, and most of the businesses who need financial help are in difficulties.

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Source:  FICO Banking Analytics Blog

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