Macroprudential policy and productivity: friends not foes

An ECB Blog post defending macroprudential regulation against the deregulation-for-growth argument. It argues capital buffers and borrower-based measures support productivity by preventing crises and stopping credit from piling into real estate. No monetary policy content: nothing on rates, inflation or the policy path.

What’s new: Nothing material for rates. This is an advocacy piece restating the ECB's established line that simplification is not deregulation, backed by an existing literature review. The only mildly useful signal is the institutional posture: macroprudential buffers and BBMs are not going to be loosened to chase growth, and the ECB continues to lean on capital markets union as the productivity answer.

KEY FINDINGS

• "Simplification does not mean deregulation" is restated as policy, with the caveat that undue complexity should still be addressed. Signals no meaningful easing of euro area bank capital requirements or mortgage lending limits, keeping bank credit supply constrained at the margin relative to a deregulation scenario.
• The post-2021 tightening of macroprudential capital buffers is judged to have had "a minimal impact on overall credit supply", with only a small number of the most capital-constrained banks cutting lending. Removes any argument that buffers need to be released for credit reasons, so the CCyB and buffer stack likely stay where they are or drift higher.
• ECB research is flagged again on euro area banks' disproportionate real estate exposures despite that sector's limited growth contribution, with BBMs endorsed as the fix. Bank equity and mortgage lending volumes face a regulatory bias against real estate collateral; no relief coming on LTV or LTI limits.
• Author points to non-bank financing and capital markets union as the actual productivity lever, since innovative firms rely on equity and venture capital. Consistent with the standing ECB push on CMU: relevant to European equity market structure over years, not to the front end.
• No discussion of the policy rate, inflation or the growth outlook in a monetary policy sense. The document does not settle anything about the ECB rate path, so it should not move Bunds.

FROM THE DOCUMENT

Simplification does not mean deregulation.

The post-2021 tightening of macroprudential capital buffers in the euro area has had a minimal impact on overall credit supply by banks, with only a small number of the most capital-constrained banks cutting back on lending.

Of course, ever-tightening macroprudential policy will not result in ever-growing productivity, and macroprudential policy should continue to be set on the basis of financial stability concerns.

The views expressed in each blog entry are those of the author(s) and do not necessarily represent the views of the European Central Bank and the Eurosystem.