The Bank warns that, in the first three years of its so-called severe stress scenario - a recessionary environment, in laymans terms - "the UK banking system would, in aggregate, incur UK consumer credit losses of around £30bn, or 20pc of UK consumer credit loans".
British lenders need to hold around an extra £10 billion pounds in capital to guard against increased risks from rapidly rising unsecured consumer lending, the Bank of England said today.
Recent figures show that the annual rate of growth for unsecured consumer borrowing through credit cards, overdrafts and personal loans still stood at 9.8pc in July.
This was down from the 11 per cent growth rate seen in late 2016, but remains high by historic standards and considerably above the growth rate of United Kingdom household incomes.
Debt charities have been warning of an intensifying crisis among less-well off borrowers, with many families forced to bprrow to make ends meet.
That is the equivalent of 20% of United Kingdom consumer credit loans.
The so-called counter-cyclical capital buffer, which tells banks to hold more capital in good times so they can absorb more losses in bad times, was raised from 0pc to 0.5pc in June, indicating that lending conditions are improving.
The Bank said that, as a share of household incomes, this was in line with historical averages, but it also stressed that defaults on consumer credit tend to rise "substantially" during recessions and can pose a risk to financial stability by inflicting losses on banks.