Enhancing financial literacy (3)

There are many lessons to be drawn from experiences around the world. In the United States, the subprime mortgage crisis was not only caused by lax monetary policy and financial regulation, or the result of misleading sales practices by lenders, it was also due to the reckless financial behavior of households, in particular, those vulnerable ones who should not have taken on mortgages under their financial circumstances.

In fact, individuals were frequently not aware of the risks they were exposed to, and did not always understand the terms and conditions of the mortgages they purchased - including those with low rate periods or with variable rate structures.

In recent years, British banks have set aside more than 9 billion in compensation for the mis-selling of payment protection insurance. However, the problem is not getting better. The annual number of complaints registered by the banking ombudsman has risen from 30,000 a decade ago to 264,000 in 2011.

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