Rising household debt poses risk to the economy

Abstract

The primary purpose of the macroprudential measures that restrict lending for house purchase is to reduce the economy’s exposure to risks stemming from high household indebtedness. These risks are realised when indebted households respond to disturbances in the economy by sharply reducing consumption. Macroprudential policies that impose capital buffer requirements for banks, on the other hand, are designed to ensure that the banking system's lending capacity and ability to function remain satisfactory under all economic conditions.