EBA issues Opinion on measures to address macroprudential risk

The European Banking Authority (EBA) published today an Opinion following the notification by the National Bank of Belgium (NBB) of its intention to modify capital requirements in order to address an increase in macroprudential risk. Based on the evidence submitted by the NBB, the EBA does not object to the adoption of the proposed measures, which are based on Article 458 of the Capital Requirements Regulation (CRR).

 

In particular, the NBB notified the EBA of its intention to replace a measure it had introduced in 2014 -subsequently extended until May 2017-, which consisted of an increase in risk weights by five percentage points for retail exposures secured by Belgian residential immovable property for Belgian Internal Ratings Based (IRB) banks. The new measure will still include the five percentage point risk weight add-on, and will be complemented with a second, more targeted component, which further increases the risk weights for the riskier mortgage loan segments on the basis of the indexed loan-to-value (LTV) ratio.

 

In its Opinion, addressed to the Council, the European Commission and the NBB, the EBA acknowledges, in line with the European Systemic Risk Board (ESRB) warning on the vulnerabilities of the residential real estate sector, that the combined increase in house prices and debt levels can pose a threat to the financial stability of banks in Belgium and as such, it does not object to the deployment of macroprudential measures. However, the EBA has drawn to the attention of the European Commission a number of issues to be taken into consideration.