Loan-to-value analysis may be incomplete as macro-pru tool – research


Loan-to-value (LTV) ratios may provide misleading analyses on the deterioration of credit conditions, says research published by the Bank of Spain.

In Beyond the LTV ratio: new macro-prudential lessons from Spain, Jorge Galán and Matías Lamas analyse two large datasets comprising more than five million mortgage operations that cover the last financial cycle. They conclude the LTV indicator may point to a misleading picture of actual mortgage credit imbalances and risk.

“The way Spanish banks

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