In addition to the bank-side capital based measures enhancing banks’ resilience, borrower-based instruments (such as LTVs or DSTIs), which have proved to be more effective in curtailing excessive credit growth, and are also applicable in a timevarying fashion, should gain more prominence. In particular, borrower-based measures should be properly embedded in European legislation, which is not the case at present.
This applies not only to fiscal policies but also to other policies which can cause imbalances within the area. In my view, the change has to come via the Commission, in particular by clarifying its institutional function and improving its independence.