EBA Does Not Object to Proposed Macro-Prudential Measure by DNB
EBA published an opinion following the notification by DNB of its intention to modify capital requirements to address an increase in the macro-prudential risk in the Netherlands. Based on the evidence submitted by DNB, EBA does not object to the adoption of the proposed measure, which is based on Article 458 (2) of the Capital Requirements Regulation (CRR). This new measure aims to enhance resilience of the Dutch banking sector to a potential severe downturn in the residential real estate market, against the background of sustained price increases in real estate over the past few years.
DNB has notified EBA of its intention to introduce a new macro-prudential measure, which consists of a minimum average risk-weight floor at the portfolio level, based on the loan-to-value (LTV) ratio of the individual loans. As part of this measure, a 12% risk-weight is proposed to be assigned to the portion of the loan not exceeding 55% of the market value of the property that serves to secure the loan and a 45% risk-weight is proposed for to the remaining portion of the loan. If the LTV ratio is lower or equal to 55, then a fixed 12% risk-weight is proposed to be assigned to the loan. In its opinion, addressed to the European Council, EC, and DNB, EBA acknowledges, in line with the ESRB recommendation on medium-term vulnerabilities in the residential real estate sector in the Netherlands, the concerns on build-up of risk in this sector, the large proportion of high-LTV loans, the high level of indebtedness in Dutch households, and the low risk-weights for real estate exposures by Dutch internal ratings-based banks. In light of this conclusion, EBA does not object to the deployment of the proposed macro-prudential measure by DNB.
Related Links
Keywords: Europe, EU, Netherlands, Banking, LTV, CRR, Residential Real Estate, Regulatory Capital, Macro-Prudential Policy, Internal Ratings Based, EBA, DNB
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Related Articles
IAIS on Package for 2020 Data Collection on ICS and Aggregation Method
IAIS published technical specifications, questionnaires, and templates for 2020 Insurance Capital Standard (ICS) and Aggregation Method data collections.
BIS to Establish More Innovation Hubs in Europe and North America
BIS announced that it will establish new Innovation Hub centers across Europe and in North America in cooperation with member central banks.
FED Updates Form FR 2052a for LCR Reporting by Banks
FED updated the reporting form for FR 2052a, which is used to monitor the overall liquidity profile of certain supervised institutions.
PRA Statement on Changes to CRR in Response to COVID-19 Crisis
PRA published a statement that sets out its views on certain amendments made to Capital Requirements Regulations (CRR and CRR2) via EU Regulation 2020/873 (CRR "Quick Fix"), including some guidance for firms.
CFRF Publishes Guide for Addressing Climate-Related Financial Risks
The Climate Financial Risk Forum (CFRF), which is a joint climate risk forum of FCA and PRA, published a guide written by the industry for the industry to help firms approach and address climate-related financial risks.
IAIS Paper Provides Guidance on Liquidity Risk Management for Insurers
IAIS published an application paper on liquidity risk management for insurers.
EBA Responds to EC Consultation on Digital Finance Strategy for Europe
EBA published its response to the EC consultation on a new Digital Finance Strategy for Europe.
EIOPA Responds to EC Consultation on Digital Finance Strategy
EIOPA responded to the EC consultation on a new digital finance strategy for Europe.
ESMA Responds to EC Consultation on Digital Finance Strategy
ESMA published its response to the EC consultation on the new digital finance strategy for EU.
FSB Report Identifies Gaps in Too-Big-To-Fail Reforms
FSB published, for consultation, a report on evaluation of the too-big-to-fail (TBTF) reforms for systemically important banks.
