Pension buyouts carry needless credit risks


Imagine you are a banker and a customer approaches you for a loan of £850,000 to buy a £1m house. Would you be willing to lend the money on an unsecured basis, or would you first insist on taking a charge over the property?

It seems a silly question. Of course you’d do the latter. But let’s park that for a moment and imagine our customer has even more extravagant demands. Not only do they refuse to put up any collateral, they want the loan to be “non-accelerable”. So even if they miss an interest payment, the lender can’t demand immediate repayment of the loan in full.

Sounds like an interesting proposition? I think most lending institutions would tell that customer to take a hike

Article from The Financial Times. To read the full article click here