FRANKFURT The European Central Bank will not ask euro zone countries to beef up measures to curb asset bubbles, it said on Thursday, even as it warned about rising property prices and household debt in some countries.
With ECB rates deep in negative territory and borrowing costs at record lows, property prices have soared in parts of Europe, raising concerns that super easy monetary policy is inflating bubbles and potentially sowing the seeds of a new crisis.
"Cyclical systemic risks remain contained in most of the countries covered by ECB Banking Supervision and in the euro area as a whole, with the financial cycle slowly picking up," the ECB said on Thursday, arguing that no broad-based increase in countercyclical capital buffers is warranted.
Such buffers are implemented to cool booms by curbing credit or to force lenders to build capital buffers in good times and to prepare for potential stress.
The EU's financial risk watchdog, headed by ECB President Mario Draghi, warned eight countries last month over asset bubble concerns but most have already started to strengthen their prudential policies, the ECB said.
Non-EU member Norway increased its countercyclical buffer on Thursday as property prices there continue to soar despite relatively modest growth.
"Most countries have already started to strengthen macroprudential policies in the real estate sector, but additional targeted macroprudential measures should be deployed," the ECB said.
A key issue, difficult to tackle with broad-based policy measures, has been the growing fragmentation within the euro zone, with asset prices in core countries like Germany rising much faster than in other nations such as Italy and Portugal.
Credit growth is recovering, however, and the pick up in bank lending indicates a progressive strengthening of the sector, the ECB said after its Governing Council and Supervisory Board jointly reviewed macroprudential policies across the currency bloc.
"The Governing Council conducted its assessment of all macroprudential decisions ... and did not deem it necessary to apply higher requirements," it said.
(Reporting by Balazs Koranyi; Editing by Francesco Canepa and Catherine Evans)