On 23 September 2022, the Bank of Italy hosted the seminar "An EU Legal Framework for Macroprudential Supervision through Borrower-Based Measures".
From the financial crisis of 2007-2009, the awareness about the potential of macroprudential policy has grown. After the diffusion of capital-based macroprudential measures, macroprudential borrower-based measures ('BBMs') are nowadays drawing the attention as additional tools that are based on the features of borrowers or of the loans, which may be at the same time very useful and quite sensitive.
The seminar examined the function and the nature of BBMs, also in terms of the initiatives underway within the EU. In a broader perspective, the contributions sketched various aspects of BBMs, from their potential to the challenges that they raise for policy and law-makers.
BBMs are spreading over the EU, as macroprudential instruments that are deemed useful to pursue a sustainable growth.
Compared to capital-based macroprudential measures, BBMs have been so far founded only in national provisions. Hence, in the seminar it was also discussed if an EU legislative framework might concur in dealing the above items in a homogenous manner, within the single market.
The Quaderno di ricerca giuridica No 94 brings together the majority of the contributions and papers of the conference participants, covering all the topics addressed during the seminar.
In his Welcome address, the Director General of Banca d'Italia highlighted the complementarity between monetary policy and macroprudential policies. He also underlined that the institutional governance of macroprudential tools should be consequential to the economic reality, ensuring flexibility of use and cross-sectoral applicability.
An example of combination of BBMs was offered by the French experience. French Authorities tamed the risk of a bubble in the residential real estate market in 2019, via a combination of a Debt-Service-To-Income ratio with a 25-year maturity limit, to prevent circumventions of the DSTI limit.
Flexibility is a feature also of the recent rules on BBMs in Italy: a core of basic provision inserted in the Consolidated Banking Law guarantees the respect of the rule of law. On that basis, the rules adopted by Banca d'Italia in 2022 are very flexible.
The importance of BBMs was affirmed by the ESRB-European Systemic Risk Board, that called for the enrichment of the acquis communautaire by the addition of BBMs for residential real estate loans; while the EU legislation should sketch the framework of a core set of BBMs, Member States could offer a wider set of BBMs. The Commission is indeed aware of the pivotal role that BBMs may play in preventing systemic risk in the real estate markets without inducing lenders to deleverage.
The seminar was closed by a speech on the legal challenges of BBMs. BBMs may actually give immediate evidence of distributional effects while their benefits for the whole economy can be better appreciated in the medium term, due to the preventative nature of macroprudential policy. That may suggest to provide for an enrichment of the accountability channels in the case of BBMs, by supplementing the traditional ex-post mechanisms with ex-ante accountability tools.
