The Financial Stability Committee recommends that the German government create a legal basis by the end of March 2016 that would allow BaFin to introduce minimum requirements for residential real estate lending – including a minimum amount of equity to be provided by borrowers or minimum debt repayment rates – should this be deemed necessary in future. In this way, threats to financial stability arising from excessive lending, price bubbles in the housing market and weakening lending standards could be limited.
International institutions such as the International Monetary Fund (IMF), the Financial Stability Board (FSB) and the European Systemic Risk Board (ESRB) have also advocated such additions to the macroprudential toolkit. Accordingly, several other European countries have also enhanced their macroprudential instruments. The recommendation to create such instruments is a preventive measure. There is no specific need to use them at this point in time. Creating a wide range of preventive macroprudential instruments is important so that financial stability problems can be addressed in as targeted a manner as possible.