EBA issues Opinion on measures to address macroprudential risk following notification by De Nederlandsche Bank
The European Banking Authority (EBA) published today an Opinion following the notification by De Nederlandsche Bank (Central Bank of the Netherlands) of its intention to extend a macroprudential measure introduced in 2020 and activated on 1 January 2022. The measure imposes a minimum average risk weight on Dutch housing loan portfolios for credit institutions that have adopted an internal ratings-based (IRB) approach. Based on the submitted evidence the EBA does not object to the extension of the measure.
The minimum average risk weight is based on a risk weight function which relies on the Loan-to-Value (LTV) for each loan. The extension of the macroprudential measure is intended to help ensure that banks hold adequate capital to cover potential losses on their housing loan portfolios.
In its Opinion, the EBA acknowledged the increasing systemic risk stemming from the Dutch housing market over the past few years and the deterioration of risk indicators since the introduction of the measure. The EBA highlighted the notable increase in house prices, housing loan LTVs, Loan-to-Income (LTI) ratios, the share of interest-only housing loans as well as the declining share of housing loans with a national guarantee.
Based on this analysis, the EBA does not object to the two-year extension of the application period of the measure.
The EBA considers that the macro-financial risk environment has changed since the introduction of the measure. The measure is extended in a time of increased financial pressures for households due to the high inflation and higher energy costs. The EBA encouraged the DNB to monitor the effects of the measure on banks’ lending behaviour and to monitor and consider the appropriate calibration of the measure.
In its Opinion dated 6 February 2020, the EBA did not object to the introduction of the measure, considering the build-up of risk in the residential real estate sector, the large proportion of high-LTV loans and household indebtedness, and the low risk weights for real estate exposures by IRB banks in the Netherlands.
EBA Opinion on measures in accordance with Article 133 (EBA-Op-2022-09)
(131.62 KB - PDF) Last update 12 September 2022
Franca Rosa Congiu