Tier 1 Capital to risk-weighted assets ratio Liquid assets to short-term liabilities ratio
1. GENERAL ASSESSMENT OF THE MACROECONOMIC SITUATION
OECD ECONOMIC OUTLOOK, VOLUME 2017 ISSUE 1 © OECD 2017 – PRELIMINARY VERSION
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countries, such as Canada, potentially increasing such countries’ exposure to any housing market correction Figure 1.23, Panel C.
Moreover, mortgage debt and overall debt relative to disposable incomes remain high in many of the countries with rapid house price growth in recent years, and have risen
further from pre-crisis levels. This increases financial stability risks if rising interest rates or a decline in income were to trigger a housing market correction. While additional
macro-prudential measures have been implemented in some countries to reduce risks and strengthen the resilience of the banking sector, further targeted actions may be necessary.
In some countries a comprehensive approach, including measures to facilitate supply and tax policy changes e.g. eliminating mortgage interest deductibility, could help to ease
upward pressures on house prices and credit growth OECD, 2017c, d. A rebalancing of policy support from monetary to fiscal policy would also help to reduce housing market
pressures.
Vulnerabilities in some emerging market economies pose important risks
Emerging market economies have made some progress in addressing financial vulnerabilities. Bank Tier 1 capital ratios have gradually improved in recent years, reaching
more comfortable levels. In 2016, bank capitalisation strengthened even in countries exposed to financial distress like Brazil, Russia and Turkey, although it declined slightly in
China Figure 1.24. Moreover, capital ratios have improved primarily as a result of recapitalisation due to increased regulatory scrutiny, rather than by adjusting the
composition of assets towards those with lower risk-weights. Deposit-taking institutions have also raised their liquidity ratios, increasing resilience to possible adverse liquidity
shocks.
In China, the monetary authorities have raised a number of money market rates this year to address strong increases in property prices and to curtail funding for leveraged
Figure 1.24. Capital and liquidity ratios have improved in emerging market economies
As a percentage of GDP
1. EMEs include Argentina, Brazil, China, Costa Rica, Colombia, India, Indonesia, Mexico, Russia, South Africa and Turkey. Simple average of individual EMEs’ ratios.
Source: IMF Financial Soundness Indicators; and OECD calculations. 1 2
http:dx.doi.org10.1787888933502085
2011 2012
2013 2014
2015 2016
8 9
10 11
12 13
14 15
16 EMEs excl. China, Russia and Turkey¹
China Russia
Turkey