Katharina Bergant (ECB) – The Anatomy of the Transmission of Macroprudential Policy

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We provide a comprehensive analysis of the transmission of macroprudential policies aimed at limiting bank risk-taking in residential real estate. Combining supervisory loan- and security-level data, we examine the effect of loan-to-income and loan-to-value limits on residential mortgages issued by Irish banks after February 2015 on residential mortgage credit, bank portfolio choice, financial stability, and real estate prices. We find that, in response to the macroprudential policy, low income households borrow less and banks reduce the rate charged to high income households who lever up taking out larger loans. The resulting credit reallocation is effective in slowing down the ongoing house price appreciation and causes banks to increase their risk-taking in both corporate credit and holdings of securities.

Friday, January 26, 2018, 11:00 a.m.

Oesterreichische Nationalbank
Otto-Wagner-Platz 3, 1090 Vienna