The conga line of commentators recommending macroprudential controls on high risk mortgage lending just got a little longer, with the ECB President, Mario Draghi, endorsing the measures at the weekend’s G20 meeting in Brisbane:
Speaking to media at the end of the G20 finance ministers and central bank governors meeting in Sydney, the European Central Bank’s president Mario Draghi acknowledged that asset price bubbles are being generated in some countries…
“These are localised bubbles and they should be coped with, they should not be ignored at all, but they should be coped with what we call macroprudential instruments…”
“Financial stability falls within the remit in the sense in the sense that each central bank looks at it in its own specific way, we view this as part and parcel of our objective of pursuing price stability, but the instruments with which you pursue this, the instruments with which you cope with localised bubbles, are macroprudential instruments that are properly crafted and designed to cope with that specific problem”…
“The loan-to-value ratio is a classical instrument for housing,” he added.
In refusing to properly consider such measures, the RBA and APRA are looking increasingly isolated.
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