As the credit card crisis is resulting in billions of dollars losses on both sides of the Atlantic, financial institutions in Europe are preparing themselves for a mounting wave of credit card delinquencies – reported Financial Times.
According to the estimates of IMF, approximately $1.9 billion of consumer debt (that is equal to 14% of the total consumer debt in the US) and 7% of the consumer debt in Europe, is expected to be lost. The UK, Europe’s largest nation of credit card borrowers, is likely to witness the largest fall, reported the newspaper.
In the US, credit card delinquencies have been on the upswing as rising unemployment and the worst financial crisis since the Great Depression took their toll on consumers. Several major banks including Citi, Bank of America, JPMorgan Chase and Wells Fargo and credit card issuers such as American Express, had to suffer heavy losses in their portfolios. In fact, the rate of credit card losses have exceeded the rate of unemployment for the first time in so many years.
The case is not different in Europe either. National Debtline of the UK has revealed that the number of calls it had received from UK customers regarding loans, mortgage arrears and credit cards, have doubled from 20,000 calls in May to 41,000. UK’s biggest credit card lenders Barclays and Lloyds Banking Group have already reported raising credit card delinquencies, and as a result, they are contemplating to reduce credit limits and tightening of approval rates for new cards.
