UK eyes bad loans surge as easy Covid-19 money vanish

Photo: AP Bank of England

Nothing is forever and that applies for debtors of UK banks as government stimulus programmes near their end. UK banks rushed to employ and train bad loans collectors on expected spike of problem credits. In the very near future the UK banks eye the expiration of £75bn emergency loans expiration, Reuters elaborated. The cash was disbursed with few or no questions asked to the applicants with the objective to achieve fast support of local businesses and households amid the pandemic led downturn.

Faced with the challenge trying to curb losses with the first Covid-19 loan repayments now falling due, Britain's four biggest banks have hired more than 750 new debt collection experts between them and training is being given on how to handle customers sensitively. "We did bootcamp training to make sure they're all ready to go," said Hannah Bernard, head of business banking at Barclays. As one of the first main financial markets to begin collecting state-backed loans from the pandemic, the world will be watching how Britain's banks fare.

The government's estimate at first reading was that losses on the most popular bounce back loan scheme that enabled small businesses to borrow up to 50,000 pounds with few questions asked – could be up to 60%, when taking into account credit problems and frauds. While the loans are either 100% or 80% guaranteed by the government - limiting the potential financial pain for banks - they must make all efforts to collect before the state pays up and some bankers said those costs could mean they make an overall loss on the scheme.

So far, senior bankers had said cases of outright fraud seemed to be lower than expected. There are also schemes allowing most borrowers to extend payments, but evidence of disputes with borrowers are rising.

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