FSA head heralds end of cheap credit

by Gill Montia

Story link: FSA head heralds end of cheap credit

The head of the Financial Services Authority, Hector Sants, has warned that the UK’s era of cheap credit may be over forever.

Speaking on the BBC’s Today programme, on Radio 4, Mr Sants stated: “I don’t think markets are ever going to return to the way they were.”

Adding: “The idea that at some point they will go back to normal, I think, is a misnomer. The new normal will be different from the way that markets behaved in the past.”

Mr Sants believes that global financial markets will be forced to change their practices, following the turmoil prompted by the US sub-prime mortgage crisis last summer.

He is predicting that banks will withdraw from the practices and complex investment products that allowed them to package and sell on loans at low cost.

In the future he expects lenders to return to conventional business practices, such as getting to know customers and forging long-term relationships with them.