The Supervisory Diamond is a microprudential tool that addresses a number of risk dimensions that materialised during the financial crisis. In the drafting phase, it was discussed whether risks related to interest-only mortgages should be a part of it. The Council's recommendation should also be seen in this context.
Both by acknowledging that risks related to interest-only mortgages with high LTVs should be included in the Diamond, but also by explicitly stating that the government should go further: The Supervisory Diamond should be supplemented with hard legislation on lower LTV limits for interest-only mortgages as the Diamond leaves too much room for discretion. The government disagreed.