EBA Opinion on Measures to Address Macro-Prudential Risk in Belgium

The new macro-prudential measure that NBB intends to introduce is based on two components. The first component consists of a flat 5 pp risk-weight add-on to the micro-prudential risk-weight for mortgage exposures for internal ratings based (IRB) banks (identical to the measure that expired in May 2017). The second one is a more targeted component that would further increase risk-weights in line with the risk profile of the mortgage portfolio of the bank by applying an additional proportional 33% macro-prudential risk-weight add-on on top of the micro-prudential risk-weight, which is to be applied to the (residential) mortgage portfolio of each (IRB) bank. The EBA Opinion is addressed to the Council, the EC, and the NBB. EBA acknowledges, in line with the ESRB warning on the vulnerabilities of the residential real estate sector, that the combined increase in house prices and debt levels could pose a threat to the financial stability of banks in Belgium in case of a downturn. In light of this conclusion, EBA does not object to the deployment, by the NBB, of this proposed macro-prudential measure. 

Related Links

• Press Release
• Opinion (PDF)

Keywords: Europe, EU, Banking, Macro-Prudential Risk, Belgium, CRR, Mortgage Exposures, Risk Weights, EBA