RECOMMENDATION OF THE EUROPEAN SYSTEMIC RISK BOARD

of 26 July 2021

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

(ESRB/2021/6)

(2021/C 358/01)

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 Articles 3 and 16 to 18 thereof,

Having regard to Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and amending Regulation (EU) No 648/2012 (2), and in particular Article 458(8) 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 (3), 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 (4) aims to ensure that all exposure-based macroprudential policy measures activated in one Member State are reciprocated in other Member States.

(3) Following the request by the Haut Conseil de stabilité financière (HCSF, High Council for Financial Stability), acting as the French designated authority for the purpose of Article 458 of Regulation (EU) No 575/2013, pursuant to Article 458(8) of Regulation (EU) No 575/2013, the General Board of the European Systemic Risk Board (ESRB) issued Recommendation ESRB/2018/8 of the European Systemic Risk Board (5) to include stricter national measure concerning the requirements for large exposures laid down in Article 392 and Articles 395 to 403 of Regulation (EU) No 575/2013 (as referred to in Article 458(2)(d)(ii) of Regulation (EU) No 575/2013) in the list of macroprudential policy measures which are recommended to be reciprocated under Recommendation ESRB/2015/2.

(4) The existing stricter national measure imposes tighter large exposure limits (5 % of the eligible capital), with regard to highly-indebted large non-financial corporations (NFCs) that have their registered office in France, on French globally systemically important institutions (G-SIIs) and other systemically important institutions (O-SIIs) at the highest level of consolidation of the banking prudential perimeter of the institution concerned.

(5) Regulation (EU) 2019/876 of the European Parliament and of the Council (6) introduced amendments to the requirements for large exposures laid down in Article 392 and Articles 395 to 403 of Regulation (EU) No 575/2013. In particular, from 28 June 2021 institutions must calculate large exposures against Tier 1 capital, excluding Tier 2 capital. The existing stricter national measure has been modified accordingly.

(6) Therefore, Recommendation ESRB/2015/2 should be amended to reflect the changes to the existing stricter national measure,

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, using 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 Tier 1 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). Norway: — a 4,5 % systemic risk buffer rate for exposures in Norway, applied in accordance with Article 133 of Directive 2013/36/EU, as applied to and in Norway on 1 January 2020 pursuant to the terms of the Agreement on the European Economic Area (*1) (EEA Agreement) (hereinafter the ‘CRD as applicable to and in Norway on 1 January 2020’), to all credit institutions authorised in Norway; — a 20 % average risk weight floor for residential real estate exposures in Norway, applied in accordance with Article 458(2)(d)(vi) of Regulation (EU) No 575/2013, as applied to and in Norway on 1 January 2020 pursuant to the terms of the EEA Agreement (hereinafter the ‘CRR as applicable to and in Norway on 1 January 2020’), to credit institutions, authorised in Norway, using the internal ratings-based (IRB) approach for calculating regulatory capital requirements; — a 35 % average risk weight floor for commercial real estate exposures in Norway, applied in accordance with Article 458(2)(d)(vi) of the CRR as applicable to and in Norway on 1 January 2020 to credit institutions authorised in Norway, using the IRB approach for calculating regulatory capital requirements. 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 using the IRB Approach for calculating regulatory capital requirements. (*1) OJ L 1, 3.1.1994, p. 3.’;"

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

Done at Frankfurt am Main, 26 July 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 L 176, 27.6.2013, p. 1.

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

(4) 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).

(5) Recommendation ESRB/2018/8 of the European Systemic Risk Board of 5 December 2018 amending Recommendation ESRB/2015/2 on the assessment of cross-border effects of and voluntary reciprocity for macroprudential policy measures (OJ C 39, 1.2.2019, p. 1).

(6) Regulation (EU) 2019/876 of the European Parliament and of the Council of 20 May 2019 amending Regulation (EU) No 575/2013 as regards the leverage ratio, the net stable funding ratio, requirements for own funds and eligible liabilities, counterparty credit risk, market risk, exposures to central counterparties, exposures to collective investment undertakings, large exposures, reporting and disclosure requirements, and Regulation (EU) No 648/2012 (OJ L 150, 7.6.2019, p. 1).