26 October 2007
The chancellor of the exchequer, Alistair Darling, has said that the UK banking system should be reformed in the wake of the Northern Rock crisis.
His comments came after the release of a new report from market analysts Datamonitor, which said that consumer credit is likely to decline in months to come - making it harder and more expensive to take out a personal loan or a mortgage.
The bank run on Northern Rock - which saw its customers queuing in their hundreds outside branches, unsure whether their deposits were safe - was caused by the global credit crunch stemming from the US sub-prime loans crisis.
Banks have raised the rates at which they lend to each other due to the market turmoil, which seems to be having a knock-on effect on consumers.
Speaking before a parliamentary select committee yesterday, Mr Darling said that the recent market troubles could not have been predicted.
"No-one anticipated a complete freezing of liquidity, which was unprecedented in modern times," he said.
Datamonitor's report, while predicting a continuing slowdown in consumer credit, offered some hope for those who hope to take out personal loans in future.
It expects the market to pick up over the next few years, growing by over £20 billion in the 2006-2011 period.
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