Importance Indicators characterizing the current state and dynamics of the residential and commercial property market should be used by the Central Bank of the Russian Federation while developing measures of macro-prudential regulation and predicting systemic risks for the financial system's soundness. Objectives The paper's objective is to introduce some indicators of the real estate market to analyze the country's business activity and predict economic development cycles. The article contains proposals for implementing the tools of macro-prudential regulation, which are based on the real estate market performance, in the Bank of Russia activities. Methods I performed a comparative analysis of the Bank of Russia and the European Systemic Risk Board activities in the sphere of using the residential and commercial real estate market indicators to predict economic cycles and potential threats to the financial system stability. Results The findings show that it is advisable to introduce new macro-prudential instruments, which are based on the real estate market indicators, in two directions: on the part of credit institutions (capital requirements, loan loss provision) and borrowers (loan-to-value and debt-to-income ratios). Conclusions There is a need to improve the methodological approaches of the Bank of Russia to macro-prudential regulation through introducing the real estate market instruments. This will enhance the quality of the regulatory impact from a perspective of regions.
Keywords: financial stability, real estate, Central Bank, macro-prudential regulation
References:
Honohan P., Laeven L. Systemic Financial Crises: Containment and Resolution. Cambridge, Cambridge University Press, 2005.
Hoelscher D., Quintyn M. Managing Systemic Banking Crises. IMF Occasional Paper, 2003, no. 224.
Borio C., Furfine C., Lowe P. Procyclicality of the Financial System and Financial Stability: Issues and Policy Options. BIS Papers, 2001, no. 1, pp. 1–57.
Boyd John H., Gomis Pedro, Kwak Sungkyu, Smith Bruce D. A User's Guide to Banking Crises. University of Texas Working Paper, 2001.
Barrell R., Davis E.P., Karim D., Liadze I. Calibrating Macroprudential Policy. NIESR Discussion Paper, 2010, no. 354.
Mian A., Sufi A. Household Leverage and the Recession of 2007 to 2009. Paper presented at the 10th Jacques Polak Annual Research Conference. Washington, DC, November 5–6, 2009.
Barrell R., Davis E., Karim D., Liadze I. Bank Regulation, Property Prices and Early Warning Systems for Banking Crises in OECD Countries. Journal of Banking and Finance,2010, vol. 34, pp. 2255–2264.
Cecchetti S.G., Kohler M., Upper C. Financial Crises and Economic Activity. NBER Working Papers,2009, no. 15379.
Barrell R., Davis E., Karim D., Liadze I. Was the Subprime Crisis Unique? An Analysis of the Factors that Help Predict Banking Crises in OECD Countries. NIESR Discussion Paper, 2010, no. 363.
Baber G. The European Systemic Risk Board. The Company Lawyer, 2011, no. 32(8), pp. 225–226.
Snowdon P., Lovegrove S. The New European Supervisory Structure. Compliance Officer Bulletin, 2011, no. 83, p. 12.
Loosveld S. Appeals against Decisions of the European Supervisory Authorities. Journal of International Banking Law and Regulation, 2013, no. 28(1), pp. 9–13.
Borio C., Drehmann M., Gambacorta L., Jimenez G., Trucharte C. Countercyclical Capital Buffers: Exploring Options. BIS Working Papers,2010, no. 317.
Goldstein M., Véron N. Too Big to Fail: The Transatlantic Debate. PIIE Working Papers, 2011, January, no. 11-2.
Keller A. The Possible Distributional Effect of the Loan-to-Value Ratio and its Use as a Macro-prudential Tool by the European Systemic Risk Board. Journal of International Banking Law and Regulation, 2013, no. 28(7), pp. 266–270.
Lim C., Columba F., Costa A., Kongsamut P., Otani A., Saiyid M., Wezel T., Wu X. Macroprudential Policy: What Instruments and How to Use Them? Lessons from Country Experiences. IMF Working Paper,2011, no. 238.
Hilbers P. House Price Development in Europe: A Comparison. IMF Working Paper, 2008, no. 211, pp. 9–10.
Case B., Wachter S. Residential Real Estate Price Indices as Financial Soundness Indicators: Methodological Issues. BIS Papers, 2005, no. 21, pp. 197–211.
