ESRB Supports Extension of Macro-Prudential Measure by NBB
ESRB published an opinion assessing the decision of NBB to extend the application period for a stricter measure on residential mortgage lending, in accordance with Article 458 of the Capital Requirements Regulation (CRR). The measure imposes a macro-prudential risk-weight add-on for all domestic credit institutions applying the internal ratings-based approach, whose retail exposures are secured by residential immovable property located in Belgium. NBB has proposed to extend this measure by one year, until April 30, 2022. ESRB supports the intention of NBB to extend the application period of this macro-prudential measure and to keep risk-weights for exposures of internal ratings-based banks to the Belgian residential real estate sector at a higher level.
The measure consists of two components. The first component imposes a 5 percentage point risk-weight add-on for exposures of internal ratings-based banks to the Belgian mortgage loans. The second, more targeted, component further increases the risk-weights based on 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 first activated on May 01, 2018 and, in line with Article 458 of the CRR, remained applicable for two years, until April 30, 2020. Due to the continuing systemic risks in the financial system, on May 01, 2020, the measure was extended for one year, until April 30, 2021. The current extension of the measure is intended to apply from May 01, 2021.
The primary aim of the proposed extension of the measure is to ensure that Belgian internal ratings-based banks are resilient to residential real estate risks. ESRB assessment focuses on the net benefits of the national measure in terms of maintaining financial stability. ESRB believes that the proposed extension of the measure will not have any procyclical effects on the real economy and the financial system. Although the COVID-19 pandemic has increased the probability of systemic risks materializing in the forthcoming quarters, the potential materialization of residential real estate risks is conditional on further economic impact of the pandemic. ESRB also believes that the alternative macro-prudential instruments listed in Article 458 of the CRR would not be adequate to address the identified risks. Finally, ESRB believes that the introduction of borrower-based measures through supervisory expectations from January 2020 does not constitute a reason for terminating or downwardly recalibrating the measure under Article 458 of the CRR.
Related Links
Keywords: Europe, EU, Belgium, Banking, COVID-19, CRR, Basel, Residential Real Estate, Opinion, Regulatory Capital, Credit Risk, IRB Approach, RRE, Macro-Prudential Policy, NBB, ESRB
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
US Agencies Amend Capital Rule to Facilitate Emergency InvestmentRelated Articles
EBA Updates Filing Rules for Supervisory Reporting
The European Banking Authority (EBA) published version 5.1 of the filing rules for supervisory reporting.
ECB Amends Guideline on Procedures for Collection of AnaCredit Data
The European Central Bank (ECB) Guideline 2021/1829 on the procedures for the collection of granular credit and credit risk data has been published in the Official Journal of European Union.
ECB Amends Guideline on Procedures for Collection of AnaCredit Data
The European Central Bank (ECB) Guideline 2021/1829 on the procedures for the collection of granular credit and credit risk data has been published in the Official Journal of European Union.
EBA Publishes Standards on Disclosure of Investment Policy Under IFR
The European Banking Authority (EBA) published the final draft regulatory technical standards on disclosure of investment policy by investment firms, under the Investment Firms Regulation (IFR).
APRA Finalizes Guidance for New Prudential Standard on Remuneration
The Australian Prudential Regulation Authority (APRA) published the prudential practice guide CPG 511 to assist banks, insurers, and superannuation licensees in meeting requirements of CPS 511, the new prudential standard on remuneration.
OCC Updated LIBOR Self-Assessment Tool for Banks
The Office of the Comptroller of the Currency (OCC) published a bulletin that provides an updated self-assessment tool for banks to evaluate their preparedness for cessation of the London Interbank Offered Rate (LIBOR).
TCFD Updates Guidance for Financial Disclosures on Climate Risk
The Financial Stability Board (FSB) published a report that examines the progress made toward disclosures aligned with recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
BCBS Report Examines Progress on Adoption of Basel III Framework
The Basel Committee on Banking Supervision (BCBS) published the progress report on adoption of the Basel III regulatory framework in member jurisdictions.
ACPR Implements Updates Related to DPM Version 3.1
The French Prudential Supervisory Authority (ACPR) has implemented, in its information system, updates linked to the Data Point Model (DPM) version 3.1.
EBA Note Examines Transition Risks of Benchmark Rates
The European Banking Authority (EBA) published a thematic note that aims to identify and raise awareness of the transition risks of benchmark rates, as the London Interbank Offered Rate (LIBOR) and the Euro Overnight Index Average (EONIA) are close to being phased out.
