Again, this is significantly lower than pre-crisis – annual growth in unsecured lending was around 12% in the decade before the crisis. But it has picked up quickly and advertised rates on some products are close to historical lows. Much of the increase has been non-credit card unsecured loans such as personal loans and car finance – the majority of car finance is provided by non-banks. And, not surprisingly, alongside the pick-up in secured lending and lower mortgage rates there has been an increase in the growth rate of house prices and a pick-up in housing market activity. After a lull in 2014, house prices are now growing at just under 6% a year – more than twice the rate of earnings growth. Mortgage approvals for house purchase have increased by 10% over the year to an average of 69,000. I do not think that the role of the macroprudential authority should be to control asset prices including house prices. But increases in house prices and housing market activity can give rise to macroprudential concerns. If they are debt financed this can in turn lead to vulnerabilities in bank balance sheets, excessive increases in aggregate debt to income ratios or adverse changes in the distribution of debt. It was this concern that led the FPC in June 2014 to limit the flow of high debt to income mortgages; those limits have not been reached but, as the housing market begins to heat up again it is prudent that they remain in place.
The success of the transition will also depend on our ability to broaden the sources of financing: we should not rely solely on green bonds. We also need more green loans, and more green financing in general, accessible to individuals, SMEs and start-ups. Mobilising this capital raises also some qualitative challenges. An orderly scaling up of green finance requires keeping markets away from green washing practices. The emergence of a new ecosystem of financial “good products”, such as green, social, impact or Sustainable Development Goals (SDG) bonds would appear to be great news. But we should be cautious not to create a confusing diversity of definitions that could undermine the reputation of green markets and impede progress. An EU-wide standard based on high level common principles regarding the management of the funds and impact assessments, articulated with a common green taxonomy is critical to protect market integrity. It would certainly make sense to build, notably on the two most widespread standards: the Green Bond Principles (GBP) and the Climate Bond Initiative (CBI). Page 5 sur 6 2 / Central Banks must also send out the right signal and lead by example in their investment and disclosure policies. We at the Banque de France have adopted in March this year a Charter on Responsible Investment for the management of our own funds and our pension portfolios: this means allocating them to socially and environmentally responsible investment funds.