CCR World Magazine


You are here  :Home arrow News arrow Wealth Gap Poses Growing Risk to Financial System, Say Bankers in FICO Survey
Contact Us Newsletter Signup RSS Feeds

Latest News Headlines

Headlines

 
Commercial Credit News

Headlines

 
Wealth Gap Poses Growing Risk to Financial System, Say Bankers in FICO Survey Print E-mail
Monday, 20 October 2014

LONDON — October 20, 2014 — The widening wealth gap is a concern to more than six in ten bank risk professionals, according to the latest quarterly survey of North American bank risk managers conducted for FICO, a leading predictive analytics and decision management software company. In the survey, 62 percent of respondents agreed that "the wealth gap poses a growing risk to the financial system in North America."

“The economy in North America is driven largely by broad-based consumer activity, so it makes sense that the concentration of wealth would raise flags among bank risk managers,” said Dr. Andrew Jennings, FICO’s chief analytics officer and head of FICO Labs. “This concern was echoed on a global scale by Credit Suisse in a recent report that found many indicators of wealth inequality are reaching levels that could result in social or political instability.”

Are we becoming desensitised to risk of student loan defaults?

For the first time in four years, a large majority (59 percent) of respondents expected student loan delinquencies to level off or decrease over the next six months. With only 41 percent of respondents expecting delinquencies to increase, this is the least pessimistic sentiment regarding student loans in the survey’s history.

“This sentiment can be interpreted in a couple of ways,” said Mike Gordon, FICO’s executive vice president of Sales, Services and Marketing. “Some lenders may simply feel things can’t get any worse, even if the outlook isn’t rosy. But others may believe the economy has finally recovered to a point that will allow more people to stay current on their student loans. It will be interesting to see if this quarter’s sentiment proves to be an aberration or the start of a new trend.”

The survey, conducted for FICO by the Professional Risk Managers’ International Association (PRMIA), also asked bankers about risks to consumer credit health. The most common concern among bankers surveyed was “under-employment and/or unemployment” (41 percent) while 22 percent cited “increasing consumer indebtedness.” The third and fourth most common concerns were “a sudden shock to the financial system” (16 percent) and “rising interest rates” (12 percent). Eight percent of those surveyed said a “weakening of the housing market” was the biggest risk to consumer credit health.

Outlook positive for small business lending

Continuing a recent trend, survey respondents throughout the U.S. and Canada were optimistic about small business lending. Among those polled, 42 percent expected the amount of credit extended to small businesses to increase over the next six months, while nine percent expected that amount to decrease. In addition, 39 percent expected the approval rate for small business loans to increase, with 15 percent expecting the approval rate to decrease.

In the survey, 27 percent of respondents said they were concerned that the supply of credit for small businesses would fail to meet demand over the next six months. That is nearly unchanged from last quarter (28 percent) and a marked improvement from the 40 percent of respondents who believed supply would fall short of demand in Q1 2014.

The survey included responses from 149 risk managers at banks throughout the U.S. and Canada in September 2014. FICO and PRMIA express special thanks to Columbia Business School’s Center for Decision Sciences for its assistance in analysing the survey results.

(Source - FICO Press Release)  

 

The CCR World App

 

Read CCR World as an App on your iPad or iPhone.
Simply click on this link (opens iTunes as an external link) to see the CCR World iTunes Preview and download to receive a free two-week trial or go to iTunes or the App Store and search for "CCR World".

CCR Magazine


Want to know more about the UK credit scene? Then take a look at our sister magazine, CCR, the leading UK publication for senior credit industry executives.

Find out more

CCR World newswire

Sign up to our E-Newsletter and E-Alerts.

subscribe

Read The Magazine - FREE ONLINE!

CCR World is the premier magazine for consumer and commercial credit professionals. It provides an independent voice to the global industry, breaking news stories and running in-depth features.

It is FREE to read online, so click here to read the current edition online.

(If you have not registered already, you will just need to do so to read all the news and analysis).

GTS Media Ltd
81 Cambridge Road
Southend-on-Sea
Essex
SS1 1EP

Registered in England No: 05483197