RECOMMENDATION OF THE EUROPEAN SYSTEMIC RISK BOARD

of 24 March 2021

amending Recommendation ESRB/2015/2 on the assessment of cross-border effects of and voluntary reciprocity for macroprudential policy measures (ESRB/2021/2)

(2021/C 222/02)

THE GENERAL BOARD OF THE EUROPEAN SYSTEMIC RISK BOARD,

Having regard to the Treaty on the Functioning of the European Union,

Having regard to Regulation (EU) No 1092/2010 of the European Parliament and of the Council of 24 November 2010 on European Union macro-prudential oversight of the financial system and establishing a European Systemic Risk Board (1), and in particular Article 3 and Articles 16 to 18 thereof,

Having regard to Decision ESRB/2011/1 of the European Systemic Risk Board of 20 January 2011 adopting the Rules of Procedure of the European Systemic Risk Board (2), and in particular Articles 18 to 20 thereof,

Whereas:

(1) In order to ensure effective and consistent national macroprudential policy measures, it is important to complement the mandatory reciprocity required under Union law with voluntary reciprocity.

(2) The framework on voluntary reciprocity for macroprudential policy measures, set out in Recommendation ESRB/2015/2 of the European Systemic Risk Board (3), aims to ensure that the same set of macroprudential requirements apply to the same type of risk exposures in a given Member State, irrespective of the legal status and location of the financial service provider.

(3) Recommendation ESRB/2017/4 of the European Systemic Risk Board (4) recommends the relevant activating authority to propose a maximum materiality threshold when submitting a request for reciprocation to the European Systemic Risk Board (ESRB), below which an individual financial service provider’s exposure to the identified macroprudential risk in the jurisdiction where the macroprudential policy measure is applied by the activating authority can be considered non-material. The ESRB may recommend a different threshold if deemed necessary.

(4) Since 1 January 2021, credit institutions, insurance corporations and professionals carrying out lending activities (mortgage lenders) in Luxembourg are required to comply with loan-to-value (LTV) limits on new mortgage loans on residential real estate located in Luxembourg, with different LTV limits across categories of borrowers: (i) an LTV limit of 100 % for first-time buyers acquiring their primary residence; (ii) an LTV limit of 90 % for other buyers (i.e. not first-time buyers) acquiring their primary residence, subject to a portfolio allowance (i.e. lenders may issue 15 % of the portfolio of new mortgages granted to these borrowers with an LTV above 90 % but below the maximum LTV of 100 %); (iii) an LTV limit of 80 % for other mortgage loans (including the buy-to-let segment).

(5) Following the request for reciprocation by the Comité du Risque Systémique (Systemic Risk Committee) to the ESRB on 18 December 2020, and in order to: (i) prevent the materialisation of negative cross-border effects in the form of leakages and regulatory arbitrage that could result from the implementation of the macroprudential policy measure applied in Luxembourg; (ii) preserve a level playing field among relevant financial institutions and preserve the overall resilience of those financial institutions; the General Board of the ESRB has decided to include this measure in the list of macroprudential policy measures which are recommended to be reciprocated under Recommendation ESRB/2015/2.

(6) The macroprudential policy measure activated by the Commission de Surveillance du Secteur Financier (Financial Sector Supervisory Commission) is a measure that is not harmonised under Union law. In line with sub-recommendation C(2) of Recommendation ESRB/2015/2, reciprocating authorities are recommended to either implement the same macroprudential policy measure as the one that has been implemented by the activating authority or, if the same macroprudential policy measure is not available in national legislation, adopt, following consultation with the ESRB, a macroprudential policy measure available in their jurisdictions that has the most equivalent effect to the activated macroprudential policy measure.

(7) The General Board of the ESRB has also decided to recommend an institution-specific threshold and a country-specific materiality threshold to steer the application of the de minimis principle by the reciprocating Member States.

(8) Therefore, Recommendation ESRB/2015/2 should be amended accordingly,

HAS ADOPTED THIS RECOMMENDATION:

AMENDMENTS

Recommendation ESRB/2015/2 is amended as follows:

1. in Section 1, sub-recommendation C(1) is replaced by the following: ‘1. The relevant authorities are recommended to reciprocate the macroprudential policy measures adopted by other relevant authorities and recommended for reciprocation by the ESRB. It is recommended that the following measures, as further described in the Annex, be reciprocated: Belgium: — a risk-weight add-on for retail exposures secured by residential immovable property located in Belgium applied in accordance with Article 458(2)(d)(vi) of Regulation (EU) No 575/2013 to credit institutions authorised in Belgium which use the IRB Approach for calculating regulatory capital requirements and composed of: (a) a flat risk-weight add-on of 5 percentage points; and (b) a proportionate risk-weight add-on consisting of 33 per cent of the exposure-weighted average of the risk-weights applied to the portfolio of retail exposures secured by residential immovable property located in Belgium; France: — a tightening of the large exposure limit provided for in Article 395(1) of Regulation (EU) No 575/2013, applicable to exposures to highly-indebted large non-financial corporations having their registered office in France to 5 per cent of eligible capital, applied in accordance with Article 458(2)(d)(ii) of Regulation (EU) No 575/2013 to global systemically important institutions (G-SIIs) and other systemically important institutions (O-SIIs) at the highest level of consolidation of their banking prudential perimeter; Luxembourg: — legally binding loan-to-value (LTV) limits for new mortgage loans on residential real estate located in Luxembourg, with different LTV limits applicable to different categories of borrowers: (a) LTV limit of 100 % for first-time buyers acquiring their primary residence; (b) LTV limit of 90 % for other buyers i.e. non first-time buyers acquiring their primary residence. This limit is implemented in a proportional way via a portfolio allowance. Specifically, lenders may issue 15 % of the portfolio of new mortgages granted to these borrowers with an LTV above 90 % but below the maximum LTV of 100 %; (c) LTV limit of 80 % for other mortgage loans (including the buy-to-let segment). Sweden: — a credit institution-specific floor of 25 per cent for the exposure-weighted average of the risk weights applied to the portfolio of retail exposures to obligors residing in Sweden secured by immovable property in accordance with Article 458(2)(d)(vi) of Regulation (EU) No 575/2013 to credit institutions authorised in Sweden which use the IRB Approach for calculating regulatory capital requirements.’;

2. The Annex is replaced by the Annex to this Recommendation.

Done at Frankfurt am Main, 24 March 2021. The Head of the ESRB Secretariat, on behalf of the General Board of the ESRB Francesco MAZZAFERRO

(1) OJ L 331, 15.12.2010, p. 1.

(2) OJ C 58, 24.2.2011, p. 4.

(3) Recommendation ESRB/2015/2 of the European Systemic Risk Board of 15 December 2015 on the assessment of cross-border effects of and voluntary reciprocity for macroprudential policy measures (OJ C 97, 12.3.2016, p. 9).

(4) Recommendation ESRB/2017/4 of the European Systemic Risk Board of 20 October 2017 amending Recommendation ESRB/2015/2 on the assessment of cross-border effects of and voluntary reciprocity for macroprudential policy measures (OJ C 431, 15.12.2017, p. 1).