Prolonged low interest rates constitute one of the major risks to financial stability internationally. This reduces incentives for bringing down debts and lead to distorted pricing in financial markets, which could cause asset price bubbles. Likewise, persistently low interest rates weigh heavily on the financial position of pension funds and life insurers, which could incite them to take additional risks.
The most important systemic risk in the Netherlands is the housing market. We intend to impose a floor for mortgage portfolio risk weights to improve the banks’ resilience. This means Dutch banks, taken together, will need to maintain around EUR 3 billion in additional capital against their mortgage loan portfolios. We announced this intended measure on October 15th and explain it in our Financial Stability Report.
Press release: DNB wants banks to maintain more capital against Dutch mortgage loans
Press release: DNB: Prolonged low interest rates are the main risk to financial stability