Top bankers warn of risky loans

31 May 2007

Top bankers have warned that many lenders are letting their standards slip and making imprudent loans.

"Lenders all too often, are setting aside key documentation and credit standards," said William Rhodes, senior vice chairman of Citigroup.

Members of the Institute of International Finance (IIF) warned that banks who loosen standards could regret it when the upswing has run its course.

The IIF is an organisation of 360 financial institutions.

It says that there is great pressure to lend money when interest rates are low and so money is relatively cheap.

"As liquidity has continued to be high and the deal flow has accelerated we have seen a lowering of lending and investing standards in some markets," said Josef Ackermann from Deutsche Bank.

Mr Rhodes said that while there has not been such a sustained period of global economic growth since before World War I, all upswings eventually run their course.