Lowering credit standards contributing to increased losses of credit card businesses by banks

Reduced vigil and lowering of standards of credit card businesses by banks, have contributed to mounting losses.

On Tuesday, at an industry conference, the head of JPMorgan Chase & Co’s consumer business disclosed that losses in the bank’s credit card business is not an isolated phenomenon restricted to JPMorgan Chase alone, it is spread across banks in the U.S.

While the largest U.S. bank is being “surgical” in deciding where to tighten the belt with regard to credit cards, instead lenders across the industry should lean towards stricter credit cards lending norms instead of loosening them.

An analysis of JPMorgan’s earnings show that while its sale volumes have risen, its credit card business has been weakening matching those of its peers in the industry.

As per a recent presentation by the bank, Chase Card has only a modest exposure to credit card borrowers with FICO scores lower than 660.

A Fitch Ratings report last month stated that credit card loss rates are seeing an upwards trend partly due to lowering of credit standards.

“I’ve called this now actually for almost two years so that nobody would be surprised. People still seem to be surprised that we are at the end of that cycle,” said Smith and went on to add that rising losses need not be a cause for concern since they are expected after an extended period of historically low loss rates.

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