DNB Proposes Risk-Weight Add-On for RRE Mortgage Loans

The measure applies to retail exposures secured by immovable property for which the collateral (immovable property) is situated in Belgium and to the Dutch credit institutions using the internal ratings based (IRB) approach. The measure focuses on IRB banks as their model-implied risk-weights are relatively low, compared to those implied by the standardized approach. The reciprocated measure will apply to the exposures, if they are exposures or branches of Dutch credit institutions or cross-border exposures to Belgium. 

The add-on consists of two elements. The first element consists of a general risk-weight add-on of five percentage points for IRB banks’ retail exposures while the second element determines the size of the (second) additional macro-prudential risk-weight add-on as a fraction (33%) of the micro-prudential risk-weight on the (residential) mortgage portfolio. An institution-specific threshold of EUR 2 billion applies. Credit institutions do not have to apply the add-on, if their exposures in scope of the measure are below this threshold. The Belgian measure is applied under Article 458 (2) (d) (vi) or the Capital Requirements Regulation (CRR).

Related Link (in Dutch)

• News Release
• Notification by Belgium (PDF)

Keywords: Europe, EU, Netherlands, Belgium, Banking, CRR, IRB Approach, Risk Weight Add-on, Residential Mortgage Loans, RRE, NBB, ESRB, DNB