Macro-pru tightening can cause ‘risk leakages’, ECB paper finds

Policy-makers should tighten household limits early in the credit cycle, researchers say

European Central Bank
The European Central Bank

A working paper published by the European Central Bank looks at the optimum time to tighten macro-prudential limits on households.

In Leakages from macro-prudential regulations: the case of household-specific tools and corporate credit, the authors examine how limits interact with credit risk levels.

Apoorv Bhargava, Lucyna Górnicka and Peichu Xie examine data from 13 countries from 1998 to 2018. They focus on policies targeting household borrowing, like loan to income, loan to value and debt

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