For a general discussion of possible tools to manage the risks linked to the housing market and household debt, see T. Andersson, C.A. Claussen, B. Lagerwall and P. Torstensson (2011), “Tools and institutions for influencing house prices and household debt”, in The Riksbank’s inquiry into the risks in the Swedish housing market, Sveriges Riksbank. 7  See also R. Juks and O. Melander (2012), “Countercyclical capital buffers as a macroprudential instrument”, Riksbank study, December, Sveriges Riksbank. 8  See the article “Higher risk weights for Swedish mortgages promote financial stability”, in Financial Stability Report 2012:2, Sveriges Riksbank. 4  BIS central bankers’ speeches  value ratio of 85 per cent when purchasing a house. One alternative is to limit borrowing in relation to income, what is known as an LTI (loan-to-income) requirement. A further means of limiting household debt is the amortisation requirement for mortgages. A mathematical example is used in our most recent Financial Stability Report to show that amortisation requirements can have substantial effects on household debt.9 …but there is no framework for macroprudential policy in Sweden, and one needs to be implemented as soon as possible There are thus a number of tools that can be used instead of the repo rate to reduce the risks related to household debt, and which in many cases would probably be more effective.
Additionally, in December 2011, the Eurosystem announced further enhanced credit support in the form of two repo operations with maturity of up to three years. There are indications that especially these three-year longer-term refinancing operations (LTRO) have proven effective in preventing an abrupt deleveraging. They significantly helped in restoring confidence in financial markets by providing insurance on the ability for banks to rely on ECB liquidity. This has taken pressure off banks to fire-sell assets or to shrink their loan book. In fact, there is some evidence that banks who bid for liquidity at the three-year operations used this liquidity to address the roll-over risk implied by the issuance of debt securities or other funding instruments that will mature over the next few years. At the same time, there is some first evidence that the provision of long-term liquidity has helped in supporting credit provisions, especially in countries more affected by the sovereign debt crisis, therefore helping to address impairments in the transmission of monetary policy. The ECB has recently announced the details of Outright Monetary Transactions (OMT) in secondary markets for sovereign bonds in the euro area in order to address severe distortions in government bond markets which in particular originate in unfounded fears on the part of investors of the reversibility of the euro. OMT also aims to safeguard the monetary policy transmission mechanism in all countries of the euro area, thereby preserving the singleness of the ECB’s monetary policy.