Strong policy support and high financial buffers are helping the financial sector weather the consecutive shocks, but pre-pandemic vulnerabilities have continued to rise. Ultra loose financial conditions, in part as a consequence of ECB’s monetary policy, have contributed to increased households’ indebtedness and stretched asset prices. Specifically, real estate prices had grown rapidly over 2018–22 with signs of overvaluation. Households’ indebtedness continued to rise, although partly mitigated by high households’ net wealth. These mounting real estate vulnerabilities prompted measures from the authorities, including on the macroprudential front, that bolstered the resilience of the banking sector but had mixed effects on the risk profile of new mortgages. The average LTV has dropped but the impact on DSTI and DTI has been more muted.
- Format
- Paper
- Frequency
- regular
- ISBN
- 9798400278785
- ISSN
- 1934-7685
- Pages
- 44
- Published in
- United States of America
- Series
- Country Report No. 2024/183
- StockNumber
- 1LUXEA2024006
Table of Contents
- Executive Summary 6
- introduction0F 9
- Background 10
- CREDIT, Household, and Corporate Risk 11
- A. Assessment of Broad-Based Vulnerabilities 11
- B. Assessment of Household and Housing Market Vulnerabilities 12
- Household-Level Stress Tests and Debt-at-Risk 13
- Stress Test Results 16
- C. Assessment of Nonfinancial Corporate (NFC) and CRE Vulnerabilities7F 18
- Corporate Debt-at-Risk and Firm-at-Risk 20
- Stress Test Results 22
- CRE Vulnerabilities 23
- institutional framework 26
- A. Willingness to Act 26
- B. Ability to Act 30
- C. Effective Coordination and Cooperation 31
- systemic risk monitoring AND ARTICULATION of POLICY decisions 31
- A. Data Issues 32
- Recommendations 34
- B. Quantitative Methods 34
- Recommendations 37
- Policy Tools and Calibration 37
