The Credit Supply Challenge


Banking dynamics, credit supply and systemic risk

Credit drives economic growth. And when credit dries up after a financial crisis, consumers, lenders and even governments can face a self-reinforcing spiral of distress.

Since 2007 many individuals and countries have experienced this crippling and potentially catastrophic spiral. In the US alone, more than 4 million homeowners have lost their properties1 while Eurozone unemployment numbers have increased by 6.9 million2. What has been less apparent is the need for a sustained and diversified credit supply as this distress spiral takes hold.

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Meeting the challenge

“If an event with widespread and severe economic and social consequences keeps on repeating itself, the onus is surely on the authorities to change something.” International Centre for Monetary and Banking Studies3

As an independent “policy incubator” CreditUtility is responding to the lending markets’ cyclical vulnerabilities by providing this focal point for developing reform proposals. The resulting recommendations are then channeled as public inputs into the authorities’ efforts to manage systemic risk. CreditUtility’s intent is to raise public awareness and enable a transparent, open discussion of how to best revive the credit supply while limiting the probability of any further distress spirals taking hold.

However, easing a de-leveraging trend and reversing a collapsed risk market can be more difficult than a casual observer might first imagine.

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How to engage

CreditUtility is a non-partisan and not-for-profit organisation enabling research and public comment on lending market policy proposals. CreditUtility welcomes and encourages broad based contributions to this forum. Please do ask questions and feel free to propose ideas. Discussion Forum participants are asked to register first (n.b. non-registered submissions may be suspended pending clarification of any transparency issues). Further details on CreditUtility’s organisation, objectives, website usage and data protection policies also appear in the “Objectives and Organisation” tab. Broadly speaking, these policies seek to protect both CreditUtility’s readers and contributors from sharp practices.

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[1] see page 2, “A leaf being turned”, speech by Andrew Haldane, Bank of England, 29 October 2012
[2] This is more than the combined populations of Europe’s second and third largest cities, Berlin and Madrid. Youth unemployment in Italy, Ireland, Spain, Greece and Portugal exceeds 33% as of September 2012 (and in some of these countries it exceeds 50%). Mervyn King, the governor of the Bank of England, has stated “this is the most serious financial crisis at least since the 1930s, if not ever” – sources: Eurostat [une_nb_m] and [une_rt_m] Euro area (17 countries) statistics; for Mervyn King’s comment see
[3] from the foreword in The Fundamental Principles of Financial Regulation, International Centre for Monetary and Banking Studies, May 7th, 2009