The proposed interagency guidance includes recommended practices that describe how institutions can use their promotional materials to provide information about the features and risks of these products, especially the risk of payment shock. For example, the guidance recommends that institutions inform consumers about the maximum monthly payment they could be required to pay once interest rate caps and negative-amortization caps have been reached.
So there may be “false alarms” or at least suspicions of “false alarms” related to the selected indicators. If this happens, the forward guidance based on numerical indicators may be less clear than was hoped for. The ECB has not taken that route.