Bank of England warns a consumer debt crisis could cost banks £30bn

Stress tests reveal lenders are underestimating exposure to bad debt in face of an economic downturn

The Bank of England has issued its strongest warning yet about the UK's ballooning consumer debt, saying Britain's banks could incur 30bn of losses on their lending on credit cards, personal loans and for car finance if interest rates and unemployment rose sharply.

After assessing the fast growth in the consumer credit market, Threadneedle Street is requiring the banking system to hold an extra 10bn of capital as protection against any future losses after finding that lenders are underestimating their exposure to bad debts in an economic downturn.

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