03 March 2020
The European Banking Authority (EBA) published today an Opinion following the notification by the National Bank of Belgium (NBB) of its intention to extend a measure introduced in 2018 regarding the use of Article 458 of the Capital Requirements Regulation (CRR). The measure is primarily driven by persistent macroprudential risks in the Belgian economy related to a substantial level of systemic risk in banks’ mortgage portfolios and of macrofinancial vulnerabilities. Based on the evidence submitted, the EBA does not object to the extension of the proposed measure, which will be applied from 1 May 2020 to 30 April 2021.
The measure for that the extension is intended to increase the risk weights for internal ratings based (IRB) banks’ retail exposures secured by residential immovable property located in Belgium and consists of two components. The first component imposes a 5-percentage-point risk weight add-on for IRB banks’ exposures to mortgage loans. The second component further increases the risk weights as a function of the risk profile of the IRB bank’s mortgage portfolio by applying a multiplier of 1.33 on the (microprudential) risk weight.
In its Opinion, addressed to the Council, the European Commission and the NBB, the EBA acknowledges, in line with the European Systemic Risk Board (ESRB), the sustained high level of systemic risk in Belgian banks’ mortgage portfolios and the persistence of macroprudential vulnerabilities in the Belgian financial system. The combined increase in house prices and debt levels may pose a threat to the financial stability of banks in Belgium in the event of a downturn.
In light of this conclusion, the EBA does not object to the extended deployment, by the NBB, of the proposed macroprudential measures, which will be applied from 1 May 2020 to 30 April 2021.
Already in its Opinion issued on 23 February 2018, the EBA did not object to the adoption of this measure, taking into consideration its effect on increasing the resilience of the Belgian banking sector. For more information on this EBA Opinion, please see https://eba.europa.eu/eba-issues-opinion-on-measures-to-address-macroprudential-ri-3 .
Franca Rosa Congiu