Madam, - In the wake of the collapse of the property market, the role of the Central Bank warrants investigation.
The bank has a key role in implementing the policy of the European Central Bank to maintain price stability. It has been clear for several years now that property prices were rising at an unsustainable rate. The rises were fuelled by unfettered lending by banks in an environment where interest rates had dropped to an all-time low after the launch of the euro.
The Central Bank should have intervened forcefully to counter the inflationary effects of the unprecedented increase in bank lending. It could and should have imposed restrictions on bank lending, such as reducing the LTV (loan-to-value) ratio.
The Central Bank’s performance illustrates what can happen when responsibility for management of our affairs is abdicated and our regulators take a hands-off approach.
Surely the role of the Central Bank in encouraging the boom and bust of the property market needs investigation. - Yours, etc,
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