German supervisors need more granular data – IMF staff

German authorities need more detailed data on mortgage lending, staff at the International Monetary Fund said today (May 9) – though they stressed concerns of a housing bubble "look premature".

"The lack of comprehensive and granular supervisory data negatively affects all aspects of financial supervision and risk monitoring," IMF staff warned. In the housing market, they highlighted the need for data "on a loan-to-loan basis".

Last year the Deutsche Bundesbank touched on similar concerns, calling for data gaps around lending to be addressed in a financial stability review published in November.

It argued the risks to financial stability from the housing market appeared "limited", but acknowledged prices "continued to grow rapidly". IMF staff said price dynamics in "hotspots" deserved "close monitoring".

They also called on the parliament to establish a legal basis for macro-prudential tools "rapidly". The German Financial Stability Committee has previously recommended building the foundations for loan-to-value ratios and debt-service-to-income ratios.

"Our work on these instruments does not necessarily mean they will be activated in the near future," Claudia Buch, the Bundesbank vice-president, said at the release of the latest review. "We do, however, need to be capable of nipping any unwelcome developments in the bud."

"Further enhancements"

In their statement, published following an Article IV consultation, IMF staff called for "further enhancements" in other areas of the German, and European, supervisory framework.

"As the supervisory landscape evolves, supervisors need to communicate their expectations to banks," staff said, "and develop guidelines and regulations that can be used to substantiate enforceable measures."

These expectations, they added, should cover the oversight role of supervisory boards, internal control and audit, related party exposures and operational risk.

They also stressed the need for "rapid" completion of resolution planning for large banks with cross-border operations, and clarification of the co-ordination arrangements for handling a systemic crisis.

Moreover, the IMF staff noted some of the largest banks across the globe were "withdrawing from correspondent relationships", which could hit emerging and developing economies.

"The authorities should encourage the relevant German banks to better manage the risks around these activities," staff said.

Faster reform

Staff also urged Germany to "step up public and private investment to meet infrastructure needs" while accelerating structural reforms to "boost growth potential".

A key element of this was expanding the participation of refugees, women and older workers in the labour force. They welcomed the "supportive measures" in place for refugees, but called for "further action".

"Policy measures to allow recognition of informally acquired skills and facilitate more flexible forms of vocational training, with a strong on-the-job component and intensive language teaching, should be strengthened," staff said.

To boost female labour supply, staff suggested enhancing childcare and after-school programmes, alongside a reduction in the "marginal tax burden on secondary earners". Almost half of employed women in Germany work part time, they observed.

Beyond the labour market, staff argued "competition-enhancing reforms in the services sector should be pursued much more vigorously". Progress had been slow, they said, but was "badly needed in light of low productivity growth".