The Bank of England crashed in 2008, leaving the citizens of Britain poorer. It started with banks giving out too many loans to people couldn’t afford to pay them back. Despite there being greater the reward for greater the risk, I don’t believe banks should lend money to people who will not be able to pay it back, as this is detrimental to everyone and it is especially unfair to those who did invest in banks and then lost everything when the market crashed.
It is my belief that this is a waste of money for the bank because if someone can’t pay the money back, the bank will lose more rather than gain more. For example, one person wants to buy a car for £6,000 and they presently do not have the money. The person earns £7.00 an hour. They then go to the bank requesting for a loan, but it is unlikely that they will be able to pay that £6,000 back, with only £7.00 an hour. I believe owning a car is a luxury, especially in comparison to something like buying food.
On the other hand, another person who also earns £7.00 an hour has a family of five. This person and their family currently live in a 2 bedroom flat and this person needs to provide £22,000 to buy their family a decent accomodation. They then go to the bank and ask for a loan. Should the bank still give them this money, knowing that it is highly unlikely that they are going to pay it back?
If the banks do not give loans to customers who cannot guarantee payment, they will lose a generous amount of profit, although this can be a huge risk, it is better for the economy as they will not be losing as much money, they will be gaining more money.
Therefore, it is my belief that in order to prevent another financial crisis the banks should be stricter with who they lend money to.