FSA managing director of prudential regulation Andrew Bailey says banks deserve a “thank you” for the way in which they have helped thousands of borrowers in financial difficulty to avoid losing their homes.
Since the financial crisis, the Government and regulator have pushed banks to employ forbearance measures such as payment holidays, temporary reductions in monthly repayments, temporarily switching borrowers to interest-only mortgages or extending mortgage terms for struggling borrowers to increase their chances of remaining in their homes.
Statistics from the Council of Mortgage Lenders show forbearance measures have reduced the level of repossessions from around 12,700 at the start of 2009 to around 8,500 up to the end of the second quarter of 2012.
Speaking today at the British Bankers’ Association conference in London, Bailey said banks should be applauded for providing forbearance to people who have hit financial difficulties.
He said: “It is easy to imply that forgiveness is a bad thing. Rather, we should deal with the consequences of forgiveness, not prevent it. The reason for that is because forgiveness has a very good side to it, namely that fewer jobs are lost and fewer homes repossessed where it take place.
“And we can see evidence of both of these in the latest recession relative to previous ones. Let me say something unusual now: I think the banks deserve a thank you for the way in which they have sought to use forbearance.”