ZIA Zentraler Immobilien Ausschuss e.V.

The three main categories of conditions specified for the setting of higher risk weights and the setting of higher minimum LGD values are in the line with CRR and therefore appropriate. From our perspective the historical losses should build the basis for the analysis and should be combined with the different expected losses due to the current development in the markets. Only if a higher volatility is expected the financial stability considerations should be taken into account as a next step. We want to point out that even for that assessment sufficient data collections are needed which are not easily available. A suitable database has to fulfill different criteria: a high frequency without a time lack, a deep regional split, based on real transactions, and a sufficient market coverage. This is very ambitioned because the transaction data are not publicly available in Germany.
The proposed recourse of collected data on behalf of Article 101 is suitable. But we think that the proposal on the adjustments is very complex and the national specifications must also be taken into account.
In our view the benchmark should be close to 0.5 % because even that is very low compared to the most real estate markets. The benchmark of 0.5 % was introduced for the hard test in Article 101 CRR and therefore suitable for the assessment as well.
In line with the comments of Deutsche Kreditwirtschaft we believe that the specification of the term of financial stability considerations is not clear enough. We suggest therefore to have a closer look on the spill-over risks for the financial stability. We believe that the risks differ from country to country. For example the owner occupation in Germany is lower than the European average and therefore the risk of a spillover of a price development onto the financial stability via the credit channel is lower than in other countries. Another stabilising effect is generated by the dominance of fixed rate loans which reduce the price elasticity regarding changing interest rates. We therefore think there should be more indicators taken into account which describe the credit chancel and the risk for the financial stability. Insofar we refer to the IMF-proposal in “The IMF-FSB Early Warning Exercise” to have a closer look on the correlation between house prices and consumption over the past ten years, the portion of fixed rate mortgages, the term of typical loans, the home ownership rate and the lending standards. This is very helpful in our view, because in Germany the LTV is lower than in other countries (lower than 70 %). The fixed interest loan is the dominant form of loans in Germany, mostly over a term of more than ten years.
Another stabilizing factor is the valuation with regard to refinancing. In many countries the mortgage lending value is derived from the current market value. In Germany the mortgage lending value (“Beleihungswert”) is calculated according to the German Pfandbrief Act (Pfandbriefgesetz) and the Regulation on the Determination of the Mortgage Lending Value (Beleihungswertermittlungsverordnung) when the refinancing is planned via a Pfandbrief. The Beleihungswert differs considerably from the current market value. It is determined in a way that leads to a value that in all probability will never exceed the current market value of the asset, even if the market value falls to its possible low. But moreover this very conservative mortgage lending value (Beleihungswert) is multiplied by 0.6 to determine the value that will be taken into account as cover for Pfandbrief purposes (Lending Limit/Beleihungsgrenze).
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Sabine Lawen
Z