ESRB Welcomes FIN-FSA Decision to Extend Stricter Measure Under CRR

ESRB welcomes this one-year extension and considers that the key vulnerabilities in the residential real estate (RRE) sector in Finland are related to elevated and rising household indebtedness, the significant proportion of housing loans in the portfolio of Finnish credit institutions, the high growth in indirect real estate lending to households through housing company loans, the easing of lending standards for new loans, and the interconnectedness with the rest of the Nordic banking system. Overall, ESRB considers that extending the measure would not entail disproportionate adverse effects for the Internal Market or other financial systems. The extension would continue to prevent a decline in the risk-weights applied by Finnish IRB credit institutions to the portfolio of housing loans and its further deviation from the levels applied in other member states. Also, keeping the risk-weight floor relatively low compared with that in other EU member states should not have a disproportionate adverse effect on the Single Market and could even be seen as leveling the playing field to some degree.

Related Links

• ESRB Opinion (PDF)
• Assessment of Finnish Notification (PDF)
• Notification of FIN-FSA (PDF)

Keywords: Europe, Finland, Banking, CRR, IRB Approach, Systemic Risk, Residential Real Estate, Macro-Prudential policy, Risk Weight, Credit Risk, FIN-FSA, ESRB