Britain largest four banks - HSBC, Royal Bank of Scotland, Lloyds Banking Group, and Barclays - are facing losses of close to £80bn over their own forecasts on loans sanctioned to customers, said the Bank of England in its Financial Stability Report.
According to BoE, £71bn had been set aside by the lenders in provisions. However, the losses on customer debts such as credit cards and mortgages will run up to £100bn in the event that the "write-off rates return to their pre-crisis average" and £150bn if losses go up to "levels seen in the early 1990s recession," reports the Daily Telegraph.
In a worst case scenario, consumer debt losses could come up to 28 per cent of the banks' £281bn worth core tier one capital - their insurance against future financial instability.
The report says that the other risk that the banks could face include a growing eurozone crisis since they have a combined exposure of around £498bn to Irish, Spanish, French and German debt.
Globally, lenders will also be required to raise €577bn to meet the new rules of the Basel Committee on Banking Supervision ahead of their implementation in 2019.
"By maintaining historical retention rates, the major UK banks could meet the new capital requirements by the end of the transition period while still increasing risk-weighted assets by around 7pc per annum - roughly comparable to the average between 1998 and 2003," said BoE.