EU banks face new debt woe

EUROPE&rsquo;S banks are set for renewed pain due to rising levels of consumer debt defaults linked to credit card loans, the International Monetary Fund (IMF) warned yesterday.<br /><br />The IMF estimates that seven per cent of Europe&rsquo;s &pound;1.5bn in consumer debt will turn sour, with the UK set to be particularly badly affected by its reliance on credit card debt.<br /><br />US lenders reporting half-year results this month have taken billions of dollars in charges relating to their credit card portfolios and the UK also looks likely to follow a similar trend.<br /><br />Charge-off rates &ndash; the percentage of loans firms give up on as unrecoverable &ndash; on credit cards in the UK reached 9.37 per cent in May, compared to 6.4 per cent last year, ratings agency Moody&rsquo;s said, putting Britain just below the US rate of more than 10 per cent.<br /><br />Peter Sergeant, partner at corporate rescue firm Begbies Traynor, said the government&rsquo;s decision to rewrite the Enterprise Act to speed up bankruptcies was partly to blame for Britain&rsquo;s credit crisis.<br /><br />&ldquo;What was perceived as a business insolvency procedure became the insolvency route of choice for the domestic economy,&rdquo; he said. <br /><br />Banks are also preparing for further losses relating to commercial property loans, with Lloyds, burdened by its HBOS legacy assets, set to be among the worst affected. <br /><br />UBS analysts have predicted that charges against its loan book will drag the Swiss bank to a &pound;6bn half-year loss<br /><br />Property firm Savills said earlier this year that around half of the UK&rsquo;s &pound;300bn in commercial property loans need to be refinanced over the next two to three years.