ECB Publishes Opinion on Measures to Limit Macro-Prudential Risks
ECB published an opinion (CON/2020/1) on measures limiting macro-prudential risks in the residential property loans. The opinion was issued in response to a request from the German Ministry of Finance for an opinion on a draft regulation on the implementation of measures to limit macro-prudential risks in the residential property construction and the acquisition loan sector (draft regulation). The draft regulation sets out detailed rules specifying new measures available to BaFin to impose certain minimum standards on lenders to limit macro-prudential risks from residential property construction or acquisition loans, including provisions on cooperation between BaFin and Bundesbank in the adoption of these measures.
The draft regulation aims to provide commercial lenders with legal certainty in relation to these new measures and the opportunity to prepare for their application, irrespective of which instruments are applied in the future. Regarding cooperation between BaFin and Bundesbank, the draft regulation provides that Bundesbank must notify BaFin immediately if it concludes on the basis of its financial stability analyses that the functioning of the financial system may be disrupted or financial stability may be jeopardized due to a systemic risk in the residential property construction or acquisition loan sector. In light of this notification and/or its own observations, BaFin may decide to draft a general administrative order containing specific measures.
ECB welcomes this increase in legal certainty with respect to possible restrictions imposed on lenders in connection with the granting of new loans for the construction or acquisition of residential property. From a financial stability perspective, ECB welcomes the implementation of a legislative framework for borrower-based measures in all euro area countries. The measures contained in the draft regulation enabling BaFin to create macro-prudential tools to counteract potential risks to the stability of the national financial system seem appropriate to the extent that they aim to promote responsible borrowing and lending, enforce market discipline, reduce credit risk, and increase the transparency of activities of credit institutions.
A thorough quantitative impact assessment is, however, important to verify the effect and appropriateness of the draft law as well as a regular review of the loan-to-value ratio to take into account the implications of changes in macroeconomic and financial conditions. ECB welcomes the role that is assigned to Bundesbank under the draft regulation. Bundesbank is well-positioned to provide data and expertise in the sector of residential property loans. The draft law does not confer genuinely new tasks on Bundesbank, but rather specifies certain new macro-prudential tools that Bundesbank may use when discharging its macro-prudential responsibilities.
Related Link: Opinion (PDF)
Keywords: Europe, EU, Banking, Macro-Prudential Tools, Systemic Risk, Credit Risk, Bundesbank, Residential Real Estate, BaFin, ECB
Featured Experts

Blake Coules
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.
Previous Article
EBA Publishes Risk Dashboard for Third Quarter of 2019Related Articles
EBA Launches Stress Tests for Banks, Issues Other Updates
The European Banking Authority (EBA) launched the 2023 European Union (EU)-wide stress test, published annual reports on minimum requirement for own funds and eligible liabilities (MREL) and high earners with data as of December 2021.
EBA Proposes Standards for IRRBB Reporting Under Basel Framework
The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.
FED Issues Further Details on Pilot Climate Scenario Analysis Exercise
The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.
US Agencies Issue Several Regulatory and Reporting Updates
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
ECB Issues Multiple Reports and Regulatory Updates for Banks
The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.
HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements
The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.
EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR
The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.
CBIRC Revises Measures on Corporate Governance Supervision
The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.
HKMA Publications Address Sustainability Issues in Financial Sector
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
EBA Updates Address Basel and NPL Requirements for Banks
The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.