Financial institutions are now making it much harder for borrowers to get their loans repaid.
New research from NIESR, the Netherlands’ research agency, shows that in 2017, almost all banks in the Netherlands were making it easier for borrowers who were not fully in arrears to get paid, rather than making it harder.
In 2018, the same trend was evident, with all but a handful of banks making it more difficult to get repaid.
NIESS has conducted the study since 2009, and its findings were published this week in the Journal of Financial Services Research.
The researchers found that banks are taking steps to limit borrowers’ ability to get out of arrear loans.
These include imposing minimum repayments and making it difficult for borrowers with poor credit scores to get the minimum repayment they need.
In addition, they found that the banks are doing more to keep borrowers in arresse, meaning they have more debt to cover, than they are able to pay.
This makes it easier to make loans out of a bad situation.
NiesS chief economist, Anne van der Veen, told the BBC that there was no doubt that many banks were struggling with the high number of borrowers in their balance sheets.
“The banks are struggling with an unsustainable number of arresseees,” she said.
“They need to do something now.”
The banks are also taking steps that might be a little less helpful to the borrowers, according to Van der Vien.
Banks are also offering higher interest rates for their loans, which are usually much more expensive than a typical loan.
This may not seem like a huge amount, but when you factor in the cost of servicing the loans and paying the interest, it can add up.
“In some cases, it’s almost prohibitively expensive to make the same payments as before,” she told the New Scientist.
“It’s also not clear how banks are using this extra revenue to improve their balance sheet.”
NIESs findings follow similar research from the Financial Conduct Authority (FCA), which found that in 2018, about 40 per cent of loans had to be written back in the first six months after they were issued, which was a 30 per cent increase on the previous year.
These figures, combined with the increase in interest rates and other costs, led to the banks making less money than they had been making before.
The FCA has been calling for more regulation of the banks since it emerged in the wake of the financial crisis.
In January 2019, the FCA announced that it would consider introducing a new set of rules, which would require banks to be audited every six months.
The rules would include mandatory disclosures on the amount of interest rates that are paid to the financial institutions.
The banks have until March 2019 to respond to the FFA’s proposal.
This is the second year in a row that the FCO has proposed a regulation, but both times it has been rejected by the Dutch parliament.
It remains unclear if the FFCA will implement the new rules.