of 22 december 2011 on the macro - prudential mandate of national authorities ” ( esrb / 2011 / 3 ) : https : / / www. esrb. europa. eu / pub / pdf / recommendations / esrb _ 2011 _ 3. en. pdf see recital 24 of regulation no 1092 / 2010 of the european parliament and of the council on european union macroprudential oversight of the financial system and establishing a european systemic risk board : the ecb and the national central banks should have a leading role in macro - prudential oversight because of their expertise and their existing responsibilities in the area of financial stability. national supervisors should be involved in providing their specific expertise. the participation of micro - prudential supervisors in the work of the esrb is essential to ensure that the assessment of macro - prudential risk is based on complete and accurate information about developments in the financial system. accordingly, the chairpersons of the esas should be members with voting rights. one representative of the competent national supervisory authorities of each member state should attend meetings of the general board, without voting rights. in a spirit of openness, 15 independent persons should provide the esrb with external expertise through the advisory scientific committee. https : / / eur - lex. europa. eu / legal - content / en / txt / html /? uri = oj : c : 2016 : 202 : full & from = en 5 / 9 the banking sector should be activated or deactivated. accordingly, other sectoral financial regulators are given responsibilities for activating their own tools. in particular, the banco de espana is now empowered to require that banking institutions establish countercyclical capital buffers by credit segment, limits on concentration in relation to economic activity sectors, and limits and conditions when underwriting new loans ( in terms of loan - to - value, loan - to - income and debt service - to - income ratios, and also the maturity, the currency in which the operation is denominated and whether the interest rate is fixed or variable, among others ). these new instruments complement those previously available to the banco de espana and included in the european legislation : 11 the countercyclical capital buffer, the systemic risk buffer and the buffer for systemic banks, among others. in addition, this year saw the creation of the macroprudential authority financial stability council, whose main goal is to contribute to the promotion of coordination and the exchange of information on financial stability issues among

by the impact of house price declines alone. this may be because highly leveraged households reduce spending to pay down debt, and because highly leveraged households may no longer be able to access credit, thus reducing consumption. bis central bankers ’ speeches during the boom explain most of the subsequent differences in house prices and bank loan losses. 8 the recent financial crisis was started in much the same way as many other crises, that is, by a huge property price bubble that was financed by massive credit expansion by banks. 9 such dramatic falls in house prices as were experienced during the crisis were followed by widespread fragility in the financial sector as borrowers ’ balance sheets became stressed. once the falls became large enough and a sufficiently large number of borrowers were affected, a full - blown financial crisis ensued. house prices, financial crises and fiscal stability unfortunately, the irish housing bubble was not an atypical event. it is therefore of interest to look more generally at property price booms and financial stability to see what the consequences of the bursting of a housing bubble are. in this section i look first at the consequences for the broader economy before looking at their impact on governments ’ fiscal positions. macroeconomic effects of housing bubbles financial crises associated with speculative boom - bust episodes have been traced back as far as the holy roman empire in the 17th century. 10 not all of these, of course, relate to property bubbles, although many do. indeed, there is ample historical evidence of house price boom - bust cycles and their economic effects. work by the imf11 found that approximately 40 per cent of house price booms were followed by busts, 12 resulting in, on average, 30 per cent house price declines, and lasting for approximately four years. reinhart and rogoff ( 2009a ) find that the cumulative decline in real house prices, from peak to trough, is in excess of 35 per cent over an average period of 6 years, although declines of 50 and 60 per cent have also been recorded ( figure 4 ). 13 so house price booms frequently end in a bust. but how frequently do they end in a financial crisis? reinhart and rogoff ( 2009a ) in their celebrated study of financial bubbles show that house price increases are indeed common prior to banking crises ( figure 5 ). bordo and jeanne ( 2002 ) find that financial crises are generally triggered when house prices have peaked, or immediately after they have started falling. of 15 advanced economies over the period 1970 – 2002