Rue de la Banque no. 21: Down payment and indebtedness ratios:how French banks limit their mortgage risks

French banks habitually use indebtedness ratios when they grant mortgages to households. In France, this policy is not driven by regulatory constraints but allows banks to avoid excessive risk-taking. This issue of Rue de la Banque assesses the effectiveness of these down payment and indebtedness ratios as tools to contain portfolio credit risk.