ESRB published an opinion on the notification of NBB to extend application period of the macro-prudential measure to increase risk-weights for exposures of internal ratings-based banks to the Belgian residential real estate sector. NBB has proposed to extend this measure by one year, until April 30, 2021. ESRB supports this measure and considers that recent developments in the residential real estate sector in Belgium warrant an extension of the measure. This decision, including an NBB regulation and the enacting Royal Decree, will be published in April 2020.
The measure consists of the imposition of a macro-prudential risk-weight add-on on all domestic credit institutions applying the internal ratings-based approach for their exposures to the residential real estate in Belgium. The first component of the add-on imposes a 5 percentage-point risk-weight add-on for the exposures of the internal ratings-based banks to Belgian mortgage loans. The second, more targeted, component further increases the risk-weights in function of the risk profile of the mortgage portfolio of the internal ratings-based banks, by applying a multiplier of 1.33 to the micro-prudential risk-weight of the residential mortgage loan portfolio. This measure was activated on May 01, 2018 and, in line with Article 458 of the the Capital Requirements Regulation or CRR, remains active for two years, until April 30, 2020. NBB intends to review the calibration and appropriateness of the measure in December 2020.
ESRB believes that extension of the proposed measure is necessary to ensure resilience of Belgian banks to the systemic risk potentially materializing in the residential real estate market. NBB decided that the extension of the period of application of this measure by one year is required because the systemic risks identified when the measure was first introduced persist and bank exposures to the Belgian residential real estate market have further increased since 2018. This extension is necessary to maintain resilience of the banking sector and ensure sufficient loss-absorbing capacity from a macro-prudential perspective, commensurate with the exposure of the internal ratings-based banks to the residential real estate sector in Belgium. The extension of this measure is an integral part of a consistent set of complementary macro-prudential instruments activated in Belgium.
Keywords: Europe, EU, Belgium, CRR, Internal Ratings Based, Residential Real Estate, Opinion, Macro-Prudential Measures, Risk Weight Add-On, Systemic Risk, Credit Risk, RRE, IRB Approach, CRR2, CRD5, NBB, BNB, 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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