Designing macroprudential regulation and supervision outside the scope of the banking union: Lessons from the Netherlands and Ireland

In the EU, macroprudential regulation and supervision is partly harmonised with the adoption of the capital requirements package and the creation of the SSM in 2013. However, some macroprudential measures remain the exclusive domain of member states and national supervisors, creating an ideal field for policy learning. This includes maximum loan-to-income (LTI) and loan-to-value (LTV) ratios, which are increasingly adopted in EU member states. This article examines the legal design choices in the Netherlands and Ireland regarding these maximum ratios. It particularly analyses how these choices contribute to preventing creative compliance, ensuring sufficient autonomy of and a balanced degree of discretion for supervisors and minimising unnecessary suppression of borrowing and lending. Both member states have made different choices regarding these three issues. This article draws lessons from these choices for designing macroprudential regulation and supervision in other countries and the EU and identifies possible improvements.

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