Instruments to prevent risk of indebtedness becoming more common in Europe

Abstract

Macroprudential instruments and their combinations affecting the demand-side of credit, i.e. borrower-based measures, aim at containing household indebtedness and preventing the build-up of risks on the housing market. Even though the maximum loan-to-value (LTV) ratio (loan cap) is still the most widely used instrument in Europe, income-related macroprudential tools are also rapidly becoming more common. The ongoing review of the EU macroprudential regulatory framework provides an opportunity to improve and harmonise the use of borrower-based macroprudential instruments in Europe.