6  We estimate that, had we not imposed the LVR restrictions, mortgage losses in a severe economic downturn involving a fall in house prices would absorb nearly all the capital banks hold against their housing loans (figure 4).
Meanwhile, Euro-yen interest rates and the Japan premium indicate strong market concerns regarding credit risks of financial institutions and liquidity risks at end-September 1998, the end of the first half of fiscal 1998. With respect to monetary aggregates, growth in M2+CDs has been slowing, reflecting the sluggish private bank lending.