The reasons why the housing market is of particular interest to the Reserve Bank , and...

The reasons why the housing market is of particular interest to the Reserve Bank , and the steps the Bank can take to mitigate risks that might arise from the housing market. Make sure you discuss the macroprudential policy measures that the Bank has put in place to address concerns arising from the housing market

Solutions

Expert Solution

Macroprudential policy focuses on the financial stability of economy. This policy focused on decision making. Macroprudential policy tools used to build up cyclical fluctuations in credit supply, interdependence across the institutions and sectors and cross boarder spill over. The policy implemented through continuous monitoring on aggregate credit growth, growth in commercial real estate, loan to deposit ratio, credit to GDP gap, growth of NPA, interest coverage ratio etc. RBI used risk weight and provisioning requirements to protect balance sheet of banks. The risk weightening provisioning includes residential housing, commercial real estate, capital market and measures to non banking financial institutions.
Measures of macro prudential policy:
Intensive supervision of financial conglomerates: This identifies the issues relating to financial stability, financial sector development, inter regulatory coordination etc.
Regulating domestically systematically important banks: there is a huge demand for housing market in domestic areas. Finding and regulating these kinds of banks increase the back up of banks. Limits on interbank liabilities: The uncontrolled liability having a dominant feature. This make increasing rate of risks among the banks.

Rahul Sunny answered 1 month ago

Next > < Previous

Related Solutions

Why is there a sluggish housing market in 2011?

3.What are the reasons behind why the Federal Reserve uses U.S. Treasury securities for open market...

3.What are the reasons behind why the Federal Reserve uses U.S. Treasury securities for open market operations?

Give TWO reasons why the interest rate for a given maturity in the commercial paper market...

Give TWO reasons why the interest rate for a given maturity in the commercial paper market is typically lower than the interest rate for the same maturity in the Eurodollar market.

The Tremblays have been preapproved by their bank to enter the housing market with a mortgage...

The Tremblays have been preapproved by their bank to enter the housing market with a mortgage interest rate of 8.6%. They have $30,000 set aside for a down payment. They have also calculated that they can afford a monthly payment of $1,350. They have narrowed their search to three houses and are hoping that financial constraints will narrow their choices. The three houses will cost the following amounts: $150,000, $270,000, and $400,000. The bank will add $50 to each mortgage...

Give two reasons that support the independence of the Federal Reserve Bank and two reason against...

Give two reasons that support the independence of the Federal Reserve Bank and two reason against such independence.

If the Reserve Bank of Australia sells bonds and securities in the open market, this is...

If the Reserve Bank of Australia sells bonds and securities in the open market, this is likely to lead to a: rise in interest rates and an appreciation of the Australian dollar. rise in interest rates and a depreciation of the Australian dollar. fall in interest rates and an appreciation of the Australian dollar. fall in interest rates and a depreciation of the Australian dollar.

list five reasons for the prohibition of commercial bank interest and explain ?

If the Federal Reserve increases the interest rate on bank deposits at the Fed, banks will...

If the Federal Reserve increases the interest rate on bank deposits at the Fed, banks will want to hold Select one: a. fewer reserves, so the reserve ratio will rise. b. more reserves, so the reserve ratio will rise. c. fewer reserves, so the reserve ratio will fall. d. more reserves, so the reserve ratio will fall.

Explain the concepts of the housing market as a continuum, and explain why a subsidy at...

Explain the concepts of the housing market as a continuum, and explain why a subsidy at the low end of the market will have an impact on the high end of the market?

The Federal Reserve Bank controls the money supply in order to affect interest rates and the...

The Federal Reserve Bank controls the money supply in order to affect interest rates and the economy. Although interest are market determined, the Fed has a strong influence on interest rates by controlling the supply of loanable funds. The Fed uses it open market operations affects interest rates. Discuss the Fed’s open market operations. please do not plagiarize

Subjects