No. 1294 - Prudential policies, credit supply and house prices: evidence from Italy

by Pierluigi Bologna, Wanda Cornacchia and Maddalena Galardo
September 2020
Vai alla versione italiana Site Search

A regulatory change introduced in Italy in 2006 repealed the limit on banks' maturity transformation (Basel 3 later introduced requirements on liquidity risk). This change incentivized banks to increase their supply of long-term credit. This work leverages this regulatory change to study, for the two years following, the effects of a regulatory loosening on mortgage supply and on housing prices in Italian municipalities.

The banks constrained by the regulation increased mortgage supply in response to the change; this did not occur for the other banks. The regulatory change incentivized the supply of longer-term mortgages, making them affordable for a larger customer base. An acceleration in house prices corresponded to the higher credit supply.

Full text

  1. 29 September 2020
    No. 1294 - Prudential policies, credit supply and house prices: evidence from Italy
    PDF 2 MB

Sezione di approfondimento