THE boss of Virgin Money has warned that cheap personal loans could pose a threat to the financial system as the banking sector marks 10 years since the collapse of Northern Rock.
Jayne-Anne Gadhia said personal unsecured loans were priced too low for a good economy “let alone one that might have an uncertain outlook”.
Ms Gadhia, who worked under Fred Goodwin at Royal Bank of Scotland until 2006, called for regulators to keep a watchful eye on the car finance market.
Northern Rock’s collapse 10 years ago saw the lender become a symbol of the financial crisis in the UK and crash into Government ownership.
The chief executive – who oversaw Virgin Money’s takeover of Northern Rock’s “good” operations in 2010 – said: “I would say that in the UK the car finance market is the area that should be watched.
“The other area that I find concerning, and Virgin Money are not in this, is personal unsecured loans that people might take out for a new kitchen or conservatory.
“The pricing on those loans is very low at the moment. I saw a pricing chart only last week and they are being priced at about 3%.
“I would say that probably there is an issue there that the price of unsecured loans is not pricing in the real risk of how they might perform in a good economy, let alone in one that might have an uncertain outlook.”
However, she added that the UK financial sector is better protected than a decade ago.
The Bank of England has attempted to shield the UK financial system since the banking crisis of 2008 by forcing high-street lenders to hold extra capital.
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