The Dutch Experience with Macroprudential Policy...The Dutch Experience with Macroprudential Policy...
Transcript of The Dutch Experience with Macroprudential Policy...The Dutch Experience with Macroprudential Policy...
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The Dutch Experience with Macroprudential Policy
Presentation for the Fourth ESRB Annual Conference, Sept 27, 2019
Klaas Knot (Governor, De Nederlandsche Bank)
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Structure of the talk
Financial stability risks in the Netherlands
International vs. domestic risks
↓
Macroprudential policy responses
Mitigating risks vs. building resilience
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Take-aways
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Main risks to financial stability
DNB Financial Stability Report Spring 2019
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Most risks are international
DNB Financial Stability Report Spring 2019
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Housing market is the main domestic risk
DNB Financial Stability Report Spring 2019
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ESRB Recommendation
Tightening of borrower-based measures and approach to calibration
Activation of capital-based measures
Structural changes related to mortgage loans and the residential real estate sector
Legal framework for borrower-based measures A
B
C
D
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Structural vulnerabilities in the housing market
In the Netherlands, household debt is high…
House prices decrease
Home-owners consume less
Adverse impact on real economy
Adverse impact on financial institutions
Household debt-to-GDP ratio (%)
…which can amplify financial crises
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Addressing the structural vulnerabilities
Fiscal subsidy
Issue: Generous mortgage
interest deductibility
Measures:
• Decrease maximum rate of mortgage
interest deductibility
• Deductibility conditional on amortisation
LTV limit
Issue: High loan-to-value ratios
Measures:
• Introduction of LTV-limit; gradual
reduction from 106% to 100%
• Recommendation of Dutch FSC to further
reduce to 90%
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Cyclical vulnerabilities are increasing
…and home-buyers are borrowing more Real estate prices have increased sharply…
Residential real estate price index
Source: Statistics Netherlands. Source: DNB.
LTI over 90% of the criterion (% new production)
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Option 1: Activating the CCyB
Credit-to-GDP ratio and gap for the Netherlands
Source: Statistics Netherlands, DNB.
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Option 2: Risk weights (CRR Art. 458)
IRB risk weights of Dutch banks are the lowest of the EU
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The role of non-banks in mortgage lending is growing
Outstanding mortgage amount in the Netherlands in EUR billion
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Take-aways
In the Netherlands:
Most vulnerabilities are international
Structural features of the housing market matter, but take time to address
Limited support for tightening of borrower-based measures
Macroprudential toolkit mainly targeted at banks
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Thank you