EBA published an opinion on the intention of NBB to extend a macro-prudential measure introduced in 2018, in line with Article 458 of the Capital Requirements Regulation (CRR). The measure is intended to increase risk-weights for internal ratings-based (IRB) banks’ retail exposures secured by residential immovable property located in Belgium. The measure is primarily driven by persistent macro-prudential risks in the Belgian economy related to a substantial level of systemic risk in banks’ mortgage portfolios and of macro-financial vulnerabilities. Based on the evidence submitted, EBA does not object to the extension of the proposed measure, which will be applied from May 01, 2020 to April 30, 2021.
The measure to be extended consists of two components. The first component imposes a five-percentage-point risk-weight add-on for IRB banks’ exposures to mortgage loans. The second component further increases the risk-weights as a function of the risk profile of the IRB banks' mortgage portfolio by applying a multiplier of 1.33 on the (micro-prudential) risk-weight. In the opinion, addressed to the European Council, EC, and NBB, EBA acknowledges, in line with ESRB, the sustained high level of systemic risk in Belgian banks’ mortgage portfolios and the persistence of macro-prudential vulnerabilities in the Belgian financial system. The combined increase in house prices and debt levels may pose a threat to the financial stability of banks in Belgium in the event of a downturn. In light of this conclusion, EBA does not object to the extended deployment, by NBB, of the proposed macro-prudential measures.
Keywords: Europe, Belgium, Banking, CRR, IRB, Systemic Risk, Opinion, Macro-Prudential Policy, Internal Ratings Based, NBB, EBA
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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