DNB has decided to adopt this Belgian macroprudential measure for the mortgage market. It now also applies to Dutch IRB banks with direct cross-border Belgian residential mortgage loans and branch offices with such loans.
The Belgian measure in detail
Based on Article 458 of the Capital Requirements Regulation (CRR), the Nationale Bank van België/Banque Nationale de Belgique in 2018 established an add-on for IRB banks for the risk weight of residential mortgage loans with Belgian homes as collateral. This add-on comprises two elements:
- a risk weight increase of 33%
- a risk weight increase of 5 percentage points.
The aim of this measure is to strengthen the build-up of capital of banks in view of the increasing risks in the Belgian housing and mortgage markets, and to reduce excessive risk appetite. In principle, the measure only applies to institutions holding a Belgian banking licence, including subsidiaries of foreign banks. The European Systemic Risk Board has recommended reciprocal application of the measure in order to prevent supervisory arbitrage.
DNB has decided to reciprocate the Belgian measure to contribute to the effectiveness of the Belgian macroprudential policy. Accordingly, it also applies to direct cross-border exposures and exposures through branch offices of Dutch banks. An institution-specific materiality threshold of EUR 2 billion applies. The reciprocal measure does not apply as long as the relevant exposures of a Dutch bank remain below this threshold.