Posted: Mon Dec 11, 2006 10:37 pm
LONDON, Dec 5 (Reuters) - Europe's biggest bank HSBC Holdings (HSBA.L: Quote, Profile , Research) urged the British government and the financial services industry to rethink legislation it says has encouraged people to escape their debts.
The deterioration in consumer lending, alongside a rising tide of bankruptcies and insolvency arrangements have been thorns in the side of Britain's retail banks since 2005. Bad debts climbed 27 percent in the first half of 2006 alone.
"The reality is there are people out there encouraging people to file for bankruptcy or restructuring," HSBC Chief Executive Michael Geoghegan told analysts in a conference call after the bank's end of year trading statement on Tuesday.
"I think it's something that the industry and government need to look at -- is this the right type of law to what it set out to achieve?" he asked.
Bankruptcies and individual voluntary arrangements (IVAs), which allow people to write off part of their debt, are not new. But their increased popularity has been partly blamed on the 2004 Enterprise Act, which included changes designed to remove the stigma of bankruptcy, and on the largely unregulated debt advice industry.
Geoghegan, who took the top job at HSBC this year, has been one of the sternest critics of the insolvency advice industry, raising concerns in August, when HSBC reported a 36 percent rise in its UK retail bad debt charge.
"When you have an industry encouraging people to (file for bankruptcy), and you haven't got a history of how to manage credit scores around that, one is very much in a position where you have to work through this social approach that people are taking to their debt liabilities," he told analysts on Tuesday.
HSBC said in its trading statement that it continued to see high levels of consumer debt, with the trend of rising bankruptcies and IVAs "unlikely to abate in the medium term".
UK banks have criticised high fees, poor advice, misleading advertising and a lack of transparency in the debt advice industry.
The main players in the sector reject the criticisms, but have set up a body to act as a regulator and provide a voice for companies that find themselves in the spotlight as more Britons declare themselves insolvent.
http://today.reuters.co.uk/news/article ... pResults-2
The deterioration in consumer lending, alongside a rising tide of bankruptcies and insolvency arrangements have been thorns in the side of Britain's retail banks since 2005. Bad debts climbed 27 percent in the first half of 2006 alone.
"The reality is there are people out there encouraging people to file for bankruptcy or restructuring," HSBC Chief Executive Michael Geoghegan told analysts in a conference call after the bank's end of year trading statement on Tuesday.
"I think it's something that the industry and government need to look at -- is this the right type of law to what it set out to achieve?" he asked.
Bankruptcies and individual voluntary arrangements (IVAs), which allow people to write off part of their debt, are not new. But their increased popularity has been partly blamed on the 2004 Enterprise Act, which included changes designed to remove the stigma of bankruptcy, and on the largely unregulated debt advice industry.
Geoghegan, who took the top job at HSBC this year, has been one of the sternest critics of the insolvency advice industry, raising concerns in August, when HSBC reported a 36 percent rise in its UK retail bad debt charge.
"When you have an industry encouraging people to (file for bankruptcy), and you haven't got a history of how to manage credit scores around that, one is very much in a position where you have to work through this social approach that people are taking to their debt liabilities," he told analysts on Tuesday.
HSBC said in its trading statement that it continued to see high levels of consumer debt, with the trend of rising bankruptcies and IVAs "unlikely to abate in the medium term".
UK banks have criticised high fees, poor advice, misleading advertising and a lack of transparency in the debt advice industry.
The main players in the sector reject the criticisms, but have set up a body to act as a regulator and provide a voice for companies that find themselves in the spotlight as more Britons declare themselves insolvent.
http://today.reuters.co.uk/news/article ... pResults-2