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The Greek banking system has been healing but needs stronger resilience. Following the extended period of private sector deleveraging, signals are emerging that households are releveraging and that imbalances are building up in the real estate market. Indicators reflecting structural vulnerabilities point to a dominant role played by the highly concentrated but weakly capitalized banking system. It would therefore be important to enhance the macroprudential policy toolkit that is solely composed of CCoB and O-SII buffers, with the CCyB never activated. The methodologies underpinning the CCyB and O-SII buffer rate determination should initially be revised, which would set the stage for preparing a conditions-based roadmap to guide the activation of the CCyB and possibly enhancement of the O-SII buffers over the medium term. Reflecting the build-up of vulnerabilities in the real estate market, it would also be important to prepare a conditions-based roadmap to guide the activation of borrower-based measures over the medium term. Further work should focus on calibration of the macroprudential policy toolkit.
1. Hong Kong SAR is a services-oriented small open economy that relies heavily on the free flow of capital, goods, and people.1 About 90 percent of GDP and employment come from the services sector. Financial services, trade and logistics, and hospitality services, which are underpinned mainly by the free flow of capital, goods, and people, respectively, account for about half of output and employment. Other services, including professional, real estate, IT/telecommunications, and public services, account for the remaining 40 percent of GDP.2