NBB published prudential expectations for banks and insurers offering home loans and has set thresholds for a series of indicators to serve as benchmarks for granting a mortgage loan. The new expectations will come into force on January 01, 2020. NBB urged financial institutions to exercise more restraint in granting mortgage loans with very high loan-to-value ratios. It also urged institutions to take better account for household indebtedness and monthly repayment burden.
The new expectations come on top of the measures that already apply for exposures to the real estate market. While the previous measures were designed to ensure the bank resilience, this latest initiative is geared more to encouraging banks and insurers to assume a more prudent lending policy. In the event of failure to comply with the expectations, the bank or the insurance company in question must be able to provide NBB with a reasoned explanation, in accordance with the comply or explain principle.
NBB had announced, on September 05, that it intended to establish new prudential expectations for Belgian banks and insurance companies that grant mortgage credit. This initiative from NBB follows on from an analysis it carried out that revealed a further increase in the vulnerability of the mortgage market in this country over the last few years and even in recent months. ESRB reached the same conclusion in a recent report on Belgium. Over the last few weeks, NBB has been holding a round of consultation on the subject for the financial sector.
Related Link: News Release
Keywords: Europe, Belgium, Banking, Insurance, LTV, Credit Risk, Residential Mortgage Lending, ESRB, NBB
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