The EU’s implementation of Basel 3.1 will reduce the risk of boom and bust property cycles by discouraging bank lending at cycle peaks, rating agency Moody’s said in a recent report.
Boom and bust cycles can affect financial stability. In advanced economies financial crises often start with an overvaluation of asset prices, especially housing and commercial real estate. This is fuelled by excessive credit growth, which can be funded by highly leveraged lenders.
