Credit capping
The credit ceilings is a monetary policy instrument to limit money growth . It affects the lending of commercial banks to private economic subjects and thus the money creation of commercial banks .
Mode of action
Certain loan growth rates are fixed at periodic intervals (usually annually) by which the banks' loans may be expanded. In extreme cases, a complete credit freeze can be prescribed. The credit ceiling can be based on a voluntary agreement between commercial banks and the central bank or on a statutory regulation.
Practical use
Credit capping used to be used mainly in France . In the Federal Republic of Germany , it was introduced in the early 1970s, when there was a risk of inflation , and in the 1990s. In Switzerland it was also used for a short period in the early 1970s. The European Central Bank does not include this instrument in its policy.
literature
- Bredemeier, Sonning: Experiences with the credit ceiling, Berlin, 1972.
Individual evidence
- ↑ Mention of the two applications
- ^ E. Tuchtfeldt (Ed.): Swiss economic policy between yesterday and tomorrow , 1976