This separation has always been present in our analysis, but Governing Council sought to sharpen the distinction in this FSR. This is because macroprudential measures have been introduced in recent months that will serve primarily to mitigate the potential consequences for the financial system of rising household debt.
These measures relate to mortgage qualifying criteria, which will raise the underlying quality of household indebtedness over time, and to financial institutions’ capital requirements and pricing criteria, which will make them more resilient to future shocks. Accordingly, these policies will help mitigate financial stability risks over time.