One of the conceptual differences of the prudential rules Basel III approved by EU within the package CRD IV/CRR in 2013 is addition of the so-called macroprudential aspect of regulation. Macroprudential regulatory instruments shall increase the resilience of banking, resp. financial sector to systemic risk and thus decrease the probability of financial crises and severe losses for the whole economy. Besides instruments implemented directly into CRD IV/CRR, the regulators use and had used before the approval of CRD IV/CRR some other macroprudential instruments, often only in the form of so-called soft regulation, i.e. some form of recommendation.
One of the examples of macroprudential instrument may be the restriction of the loan amount to the value of real estate (so-called LTV ratio or loan to value) or to the debtor’s income (so-called LTI or loan to income) for the so-called real estate loans, which may belong to the loan segment which can cause systemic risk. Real estate loans can be defined in terms of the purpose (typically e.g. financing acquisition of real estate or its maintenance, or even more specifically e.g. real estate for housing) and also in terms of the type of collateral, where real estate is the accepted collateral, or in terms of the type of a client (retail client, corporate client etc.).
Last autumn, the National Bank of Slovakia issued macroprudential recommendations regarding retail loans secured by real estate – see following link: http://www.nbs.sk/_img/Documents/_Dohlad/Makropolitika/Recommendation_NBS_1_2014_EN.pdf
The Czech National Bank issued in April 2015 a discussion material concerning a similar type of contemplated recommendation. The CNB declares that this recommendation shall relate to risks connected to development on the market of retail loans secured by residential real estate, and that it is being prepared in compliance with the recommendations of European Council for systemic risks and other international authorities and in compliance with legal acts of EU – see following link (in Czech only): http://www.cnb.cz/miranda2/export/sites/www.cnb.cz/cs/legislativa/konzultacni_materialy_a_navrhy/download/makroobezr_dopor_cnb_rizika_retail_uver.pdf
29-5-2015
Following to the previous public consultation, the Czech National Bank issued on 16th June 2015 official information which represents a recommendation on risk management with reference to retail mortgages secured by residential immovable property. The recommendation applies to banks, foreign bank branches and credit unions and it has a preventive nature. The recommendation should contribute to prudential assessment of mortgages and preferably, it should reduce the ratio of credit with high LTV, mainly more than 90 %. Furthermore, the LTV ratio of residential mortgages should by no means exceed 100 %.
Update 7-7-2015