Time to act

Banks and other financial institutions make decisions every day of the week based on prevailing market conditions and, more importantly, on government and Bank of England-led advice and policy statements.

If that advice is unequivocal then the decision makers will only have one road to go down, but what should that unequivocal advice now be?

The sage pundits think the banks should be acting now, while their profits are gaining strength, to deal with the ‘bad book’ elements of their loan books. Putting such a decision off will merely lead us into a time when yield curves are on a diminishing cycle and the problem becomes compounded.

A clear policy statement from government and the Bank of England could address this point and get the market moving in a particular decisive direction.

If the banks charged a levy during times of strong profitability, then this might be used as a form of deposit insurance against loss in the less good times. Many believe the risk of us not learning from this most recent period of banking instability will come about if those that are responsible for future ‘risk’ are simply allowed to build up leverage levels to unacceptable levels once more.

Let there be no future misunderstanding - we need strong governance now. In this way the property market will be re-built on bedrock and not sand.

Justin Sumner is director - new homes at consultancy GL Hearn

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