As part of recent regulatory developments, the Federal Financial Supervisory Authority of Germany (BaFin) announced that the revised "Solvency Regulation (SolvV)" came into force on September 25, 2021. One of the changes involves the addition of a new Section 36a in the Solvency Regulation to provide the legal basis for calculating the capital buffer for systemic risks. BaFin also noted that the "Institute Remuneration Ordinance (InstitutsVergV)," which came into force on September 25, 2021, implements the fifth Capital Requirements Directive (CRD5). Finally, BaFin issued an order pursuant to Section 48 (7) of the German Banking Act (KWG), which recognizes Luxembourg's loan-to-value limit for private residential property financing.
The BaFin order implements a recommendation that the European Systemic Risk Board (ESRB) published on June 11, 2021. The General Board of the ESRB decided to include a macro-prudential measure for loan-to-value (LTV) limits on the new mortgage loans in the residential real estate in Luxembourg to the list of macro-prudential policy measures that are recommended for reciprocation. The ESRB recommendation specified the legally binding LTV limits for new mortgage loans on residential real estate located in Luxembourg, with different LTV limits applicable to different categories of borrowers:
- LTV limit of 100% for first-time buyers acquiring their primary residence.
- LTV limit of 90% for other buyers (that is non first-time buyers) acquiring their primary residence. This limit is implemented in a proportional way via a portfolio allowance. Specifically, lenders may issue 15% of the portfolio of new mortgages granted to these borrowers with an LTV above 90% but below the maximum LTV of 100%.
- LTV limit of 80% for other mortgage loans (including the buy-to-let segment).
Related Links (in German)
- News on Solvency Regulation
- News on Remuneration Ordinance
- News on LTV Measure
- Order on LTV Measure
- ESRB Recommendation, June 2021 (in English)
Keywords: Europe, Germany, Banking, CRD5, Basel, Remuneration, Solvency Regulation, Luxembourg, Systemic Risk, Macro-Prudential Policy, Regulatory Capital, Residential Real Estate, Credit Risk, LTV, RRE, Bafin, ESRB
Across 35 years in banking, Blake has gained deep insights into the inner working of this sector. Over the last two decades, Blake has been an Operating Committee member, leading teams and executing strategies in Credit and Enterprise Risk as well as Line of Business. His focus over this time has been primarily Commercial/Corporate with particular emphasis on CRE. Blake has spent most of his career with large and mid-size banks. Blake joined Moody’s Analytics in 2021 after leading the transformation of the credit approval and reporting process at a $25 billion bank.
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