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Luxembourg: Financial Sector Assessment Program—Technical Note on Macroprudential Policy Framework, Tools, and Calibration
Author:
International Monetary Fund. Monetary and Capital Markets Department
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Series:
IMF Staff Country Reports
Volume/Issue:
Volume 2024: Issue 183
Language:
English
Publication Date:
24 Jun 2024
DOI:
https://doi.org/10.5089/9798400278785.002
ISBN:
9798400278785
ISSN:
1934-7685
Pages:
44
Keywords:
Banque Centrale du Luxembourg; households stress test result; NFCS debt; RRE price; requirement regulation; alternative investment; Macroprudential policy; Financial sector stability; Mortgages; Stress testing; Housing prices; Europe
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This paper discusses a technical note on Macroprudential Policy Framework, Tools, and Calibration for the Luxembourg Financial Sector Assessment Program (FSAP). Strong policy support and high financial buffers are helping the financial sector weather the consecutive shocks, but pre-pandemic vulnerabilities have continued to rise. The authorities have made commendable progress in developing their operational framework in line with the 2017 FSAP recommendations. The 2024 FSAP suggests multiple avenues to reduce the risk of inaction bias and enhance the effectiveness of macroprudential policy. The macroprudential authorities should strengthen communication on macroprudential policy decisions, including in case of inaction, and enhance accessibility to the public. Communication by the systemic risk committee on macroprudential decisions and elements underpinning the decision should be systematic even if no action is taken, and accessibility to the public enhanced. In the short term, macroprudential policy should preserve resilience against real estate vulnerabilities through targeted capital-based measures, and then address structural indebtedness early in the recovery cycle through borrower-based measures.
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Cover IMF Staff Country Reports
IMF Staff Country Reports
ISSN:
1934-7685
Publisher:
International Monetary Fund