EC to introduce new banking practices

The European Commission unveiled plans today to ensure the practices, that led to the irresponsible behavior during the housing bubble, of the banks become more transparent to the consumer. The EC aims are for clearer advertising and more comparable "pre contractual information" and tougher measures in the ability of borrowers to repay the loans they have applied for. The plan aims to avoid the granting of loans to high-risk borrowers and that borrowers are properly informed about the possible implications and risks involved in taking out the loan.

These new measures will allow a easier and clearer way to understand the terms of a loan offered by banks to consumers and allow consumers to compare the different terms to find the best loan for them. The new measures should also reduce reckless loans given out by the banks as defaults and negative equity rises in the European states as tougher measures in the ability of borrowers to repay will be introduced, although banks still have the final say in offering loans to borrowers who may be classed as high-risk.

"Borrowers will have to provide necessary detail about their ability to pay and lenders will be obliged to assess a customer's ability to repay."

The draft directive is still under review and negotiation of E.U governments.This plan when introduced may force further foreclosures as banks may become more uneasy about loaning to struggling businesses and People looking for a mortgage will have to prove they can repay the loan under this draft European Union law. But in the long run these new measures should ensure that reckless granting of loans will not occur again in the European states.

"We strongly believe that such provisions will lead to an unbalanced shift of liability to the lender and to even more legal uncertainty and litigation, which in turn will result in a restriction of access to credit for an increased range of prospective borrowers, notably first-time buyers, the self-employed, those with a lower income," Ms Lambert EMF Secretary General said.