It is crucial that supervisors are made aware of lenders’ provisions for potential losses being masked by forbearance measures, says Paul Tucker, deputy governor at the Bank of England.
Speaking at the British Bankers’ Association conference today, Tucker says it is not always bad for lenders to use forbearance measures, but they need to make provisions for any potential losses and declare these to supervisors.
He says supervisors need this information in order to assess capital adequacy requirements.
Referring to the Bank’s Financial Stability Report published earlier this week, which said forbearance could be masking the true number of mortgage borrowers in arrears, Tucker says the key question that remains unanswered is to what extent lenders are making provisions for forbearance losses.
He says: “It is legitimate for supervisors to take an interest in provision policy because you cannot access capital adequacy requirements without knowing the extent of lenders’ provisions.”