We may all pay a very high price for banks’ throwaway lending policies

BANKS get blamed for lots of things, but often not for what they do worst. What is considered excessive profiteering is attributed often to the fees and charges they demand for providing services, but where some banks — particularly smaller ones — are really culpable of damaging the economy and the lives of individuals is in their lending practices.

This could become a very big issue over the next couple of years because of what some banks have done to their customers over the last five. Ireland is threatened with a sharp and damaging economic slowdown largely because of the way in which some banks have lent recklessly.

Many individuals may now suffer the consequences of receiving loans much bigger than they could really afford, especially as inflated asset valuations subside. The flip-side is that having lent excessively, some of these banks may now rein in their lending excessively, exacerbating the slowdown by denying credit to those who need it (and who could repay it).