Low interest rates and housing market main risks to financial stability

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

Indicators of Financial Stability

What is financial stability?

The financial system is at the heart of the economy. It enables people to save, borrow, invest and hedge financial risks that they are unwilling to bear themselves. A stable financial system guarantees that payments can be made securely and quickly. These services are often taken for granted, even though they are essential to the functioning of the economy. This is why DNB is committed to maintaining a smoothly operating financial system that is sufficiently resilient to shocks and contributes towards creating sustainable economic growth in the Netherlands.

What is financial stability?

How does DNB promote financial stability?

DNB is committed to ensuring stable prices, solid financial institutions and a properly functioning payment system. These elements are all essential to maintaining a smoothly operating financial system. DNB also focusses on risks that may harm the financial system as a whole, warns against these risks and issues advice. For instance by arguing for a limit to the amount of mortgage loans that home owners are allowed to take out. We also improve the financial system's resilience by requiring financial institutions to strengthen their buffers. To this end,

How does DNB promote financial stability?