What keeps them awake at night
The fear that dares to speak its name
Risk management's final frontier
Foreign passport, who needs one?
CREDIT CARDSCracks in the plasticCredit cards aren't what they used to be. When they were first sold, they were marketed to financially sound bank customers. Their relatively high interest rates reflected not so much risk as the fact that they weren't intended to be used for long-term loans. They were unsecured, but banks chose customers carefully. But credit cards turned out to be money-spinners for the issuers. That meant more banks scrabbling for market share. In turn, this implied less discrimination about customers and lower interest rates but also a frightening increase in defaults. The result is that credit cards now head the banking risk list. Credit cards represent a risk so severe that defaults could create a debt crisis as significant as LDC and property loans in the 1980s. Loan volumes are huge $360 billion in the US alone, more than twice Brazil's foreign debt. Loans on cards are showing rapid growth: in the US it has averaged 20% annually for the past three years, with some banks expanding their portfolios 500% in that period. |