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The domestic sources of macroprudential policy divergence: financial regulation and the politics of housing in Germany and the UK


What role do domestic institutional and structural factors play in the emergence of national macroprudential regimes? So far, the literature on macroprudential policy has mainly focused on transnational processes of knowledge production. We therefore still know very little about what causes the observed differences in macroprudential regimes at a country level. The paper addresses this issue by way of an examination of housing sector related macroprudential policies in the UK and Germany. It finds that part of the reason for the observed differences is to be found in the fact that macroprudential authorities in the two countries tend to construct the intermediate goals of their macroprudential interventions in somewhat different ways, with the UK paying much greater attention to broader macroeconomic outcomes. These differences themselves, however, can only be properly understood in relation to the wider institutional and structural context (including different types of growth models) within the two countries, which create different links between their housing sectors and the real economy.

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  1. In the classification suggested Schwartz and Seabrooke’s article, Germany was classified as belonging to a “corporatist-market” type of VoRC, due to its relatively low level of home ownership, and moderate levels of housing related debt. As Schwartz and Seabrooke (2008: 244) show, in the 90s, Germany and the UK had roughly similar levels of housing related debt as a proportion of GDP. Since then, the paths of the two countries have radically diverged (Fuller, 2016). Given that the classification is based on deviations from the average within the OECD, Germany is likely to be much more of an outlier nowadays in terms of its mortgage debt being well below average (Fuller, 2016), which would place it in the group of “statist-developmentalist” countries according to the original VoRC taxonomy.

  2. “Loan-to-value” ratio requirements aim to influence the amount that banks can lend as a proportion of the total value of the house. “Debt-to-income” requirements on the other hand regulate the amount that banks can lend relative to both the pre-existing debt and the income of individual borrowers, with the aim of capping the debt servicing burden of households relative to their income.

  3. Arguments in this regard include that those borrowing at high LTV ratios tend to be either very wealthy (and thus more likely to be able to repay) or poorer but investing in low value housing (thus limiting the losses banks incur from defaults).

  4. Especially important in this regard are the valuation practices in Germany, which are among the most cautious in Europe, as well as the rigorous assessments of creditworthiness of potential borrowers.

  5. A list of all written statements can be found and downloaded here:

  6. This analysis was done by webscraping all speeches published between 2007 and 2020 by the Bundesbank and the Bank of England. Overall, this yielded around 1200 speeches in the case of the Bundesbank and more than 900 in the case of the Bank of England. All speeches were then processed (this included extracting the textual material from pdfs) and analysed in python. Numerous manual checks by the author (i.e. by using a random sample of speeches and manually counting occurrences to compare them against the programmatically generated ones) were done to ensure the accuracy of the produced data. For more information please contact the author.

  7. All comparisons are based on a “mentions per speech” metric calculated by the author, to ensure that the fact that one central bank might have published more speeches in a given year does not affect the comparison.


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Kotucha, N. The domestic sources of macroprudential policy divergence: financial regulation and the politics of housing in Germany and the UK. Comp Eur Polit (2022).

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