Description:
Regulatory regimes are actively
discussing macroprudential policy. Korea pursued a
countercyclical macroprudential approach to prevent the
overheating of mortgage lending and to minimize the risk of
loan default. The Korean financial supervisory authority
made adjustments in response to both the condition of the
housing market and trends in mortgage loans. The lessons
learned from the Korean experience are applicable to other
situations. First, regulations regarding loan-to-value and
debt-to-income ratios and other restrictions on mortgage
lending can be employed as an important part of a
countercyclical framework. Next, measures need to be applied
in a timely manner and according to the specific conditions
of each country. Finally, authorities should preemptively
prepare macroprudential instruments before banks enter a
period of rapid mortgage lending to avoid reckless mortgage
lending operations and weaken any speculative motive in the
housing market.