Selected Issues Papers

Borrower-Based Macroprudential Instruments in Germany

By Galen Sher

July 24, 2023

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Format: Chicago

Galen Sher. Borrower-Based Macroprudential Instruments in Germany, (USA: International Monetary Fund, 2023) accessed November 8, 2024

Summary

Germany’s macroprudential policy toolkit is well-developed, but its key missing piece is a set of instruments related to a borrower’s income. In addition, existing powers to adopt LTV limits have not yet been deployed. Against this background, this paper advances the discussion of borrower-based macroprudential policy in Germany by explaining how borrower-based measures could strengthen financial stability, macroeconomic stability, and consumer protection; explaining how potential concerns about these instruments could be addressed; offering approaches to initial calibrations of instruments for further analysis; and hinting at their likely effects based on other countries’ experiences. The paper also uses a microsimulation model to show that activating borrower-based measures could provide as much capital to the banking system as the capital buffer requirements that were activated in 2022.

Subject: Financial institutions, Financial sector policy and analysis, Financial sector stability, Housing prices, International organization, Loans, Macroprudential policy instruments, Monetary policy, Mortgages, Prices

Keywords: Borrower-based, Debt-service-to-income ratio, DSTI, Example calibration, Financial sector stability, Germany, Global, Housing market crash scenario, Housing prices, Instruments in Germany, Loans, Loan-to-value ratio, LTV, Macroprudential policy, Macroprudential policy instruments, Macroprudential policy toolkit, Mortgage, Mortgages, Reference scenario

Publication Details

  • Pages:

    36

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Selected Issues Paper No. 2023/060

  • Stock No:

    SIPEA2023060

  • ISBN:

    9798400250965

  • ISSN:

    2958-7875

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