EN ECB-PUBLIC  
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 20 September 2011 
on lending to natural persons 
(CON/2011/74) 
 Introduction and legal basis
 
On 5 September 2011, the European Central Ba nk (ECB) received a request from Banca Na ţională a 
României (BNR) for an opinion on a draft regulation on lending to natural persons (hereinafter the ‘draft 
regulation’).  
The ECB’s competence to deliver an  opinion is based on Articles 127(4) and 282(5) of the Treaty on the 
Functioning of the European Union, and the sixth i ndent of Article 2(1) of Council Decision 98/415/EC 
of 29 June 1998 on the consultation of the European Central Bank by national authorities regarding draft 
legislative provisions1, as the draft regulation relates to rules app licable to financial institutions insofar as 
they materially influence the stability of financial institutions and markets. In  accordance with the first 
sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council 
has adopted this opinion. 
 1.  Purpose of the draft regulation 
1.1 The main purpose of the draft regulation is to  update lending requirements applying to credit 
institutions that provide loans to natural persons , with a view to financial stability. The draft 
regulation covers loans for real estate investments an d consumer credit. It is part of the prudential 
measures limiting risks related to the indebtedn ess of natural persons. It is intended to reduce 
systemic risk within the banking sector, as well as to protect consumers against excessive financial liability. Accordingly, the draft regulation aims to  contribute to the overall stability of the financial 
system. 
1.2 The requirements for lending to natural pers ons provided for in the draft regulation include: 
(a) rules to assess a borrower’s ability to meet its financial obligations; (b) maximum acceptable 
loan-to-value ratios for real estate; (c) mini mum guarantee-to-loan ratios for consumer credit 
denominated or indexed in a foreign currency; (d ) maximum credit maturity for consumer credit; 
and (e) rules relating to the lending process and cond itions, including information to be provided to 
borrowers (such as booklets with warnings on the po ssibility and consequences of an increase of 
the credit cost if exchange rate risk materialises ) and clear information in the credit agreement or 
                                                 
1  OJ L 189, 3.7.1998, p. 42.  
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2 reimbursement schedule on the possibility of an increase of the amounts to be repaid should 
exchange rate risk or interest rate risk materi alise. The definitions of loans for real estate 
investment purposes and consumer credits are also provided, so that the amended framework will cover all credit provide d to natural persons. 
 2.  General observations 
2.1 BNR has informed the ECB that Romania in tends to establish by 31 October 2011 measures to 
balance the currency structure of loans granted to natural persons in the context of the financial 
assistance programmes concluded with the Inte rnational Monetary Fund and the European 
Commission. In view thereof, the consulting au thority invokes reasons of extreme urgency and 
asks the ECB to deliver its opinion by 20 September 2011. The ECB would like to draw the consulting authority’s attention to the fact that  according to the second sentence of Article 4 of 
Decision 98/415/EC, the ECB must be consulted ‘at an  appropriate stage’ in the legislative process. 
This implies that the consultation should take place at a point in the legislative process that affords 
the ECB sufficient time to examine the draft legislative provisions and to adopt its opinion in the required language versions  and which also enables the relevant national authority to take the ECB’s 
opinion into consideration before these provisions are adopted.  
2.2 The ECB welcomes the draft regulation, which is  aimed at promoting responsible lending by credit 
institutions, enforcing market discipline, and in creasing the transparency of credit institutions’ 
activities to provide a higher level of consumer protection, especially in the area of credit for real estate investment. From a financial stability pers pective, the ECB supports the measures that are 
aimed at ensuring responsible borrowing and lending, and restoring consumer confidence. 
2.3 The ECB understands that BNR follows the current  legislative initiatives at Union level related to 
the proposal for a directive of the European Pa rliament and of the Council on credit agreements 
relating to residential property
2. In this context, the ECB refers to its Opinion CON/2011/583. The 
ECB understands the relevant nationa l legislation will, if necessary, be aligned with the future 
Directive.  
 3.  Specific observations 
3.1 Criteria for assessing consumers’ creditworthiness 
 The ECB welcomes the introduction of quantitative limits
4 insofar as such measures should 
contribute to strengthening credit institutions’ lendi ng practices, while also ensuring consistency in 
assessing consumers’ creditworthiness. As regards the quantitative limits referred to above, the 
                                                 
2  COM(2011) 142 final. 
3  All ECB opinions are published on the ECB’s website at www.ecb.europa.eu. 
4 Article 11 and Article 13(1) of the draft regulation. 
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3 ECB recommends subjecting them to a thorough im pact assessment study of their appropriateness5, 
regularly reviewing them to take into account th e implications of changes in macroeconomic and 
financial conditions and complementing them, if necessary, with other measures (for instance, the provision of maximum debt-to-income ratios).  
3.2 Foreign currency lending 
3.2.1 High levels of foreign currency loans to  unhedged borrowers may cr eate latent financial 
vulnerabilities in certain Member States
6. Such lending converts direct exchange rate exposure in 
the banking system into credit risk and exposes th e economy to significant macro-financial risks. 
Given the potentially negative side effects associ ated with foreign currency lending, the ECB 
emphasises the importance for policymakers taking appropriate measures to avoid an excessive accumulation within the banking system
7. Generally, there is a need to ensure that strict and 
prudent regulatory and administrative measures are in place for lending to unhedged domestic 
borrowers in a foreign currency. In addition, banks should always hold sufficient capital to reflect the specific risks associated with foreign cu rrency lending, in particular as regards the 
transformation of exchange rate risk into credit risk. 
3.2.2 The ECB welcomes the stricter limitations on the acceptable loan-to-value ratios where the credit 
and income currencies are different, which woul d take into consideration potential foreign 
exchange risk. In addition, the regulatory framewo rk could be amended to provide incentives to 
credit institutions to offer domestic currency lo ans to customers, for the same purposes as foreign 
currency loans.  
3.2.3 More generally, the European Systemic Risk Bo ard (ESRB), in considering options to reinforce the 
resilience of the Union financial system, has identified as one of the challenges the potential 
problems arising from foreign currency borrowing by households and small and medium-sized 
enterprises within the Union
8. The outcome of the work undertaken  by the ESRB in this regard will 
need to be adequately taken into accoun t by the relevant national authorities. 
 This opinion will be published on the ECB’s website.  Done at Frankfurt am Main, 20 September 2011. 
[signed] 
The Vice-President of the ECB 
Vítor CONSTÂNCIO 
                                                 
5  In the Financial Stability Review of June 2011, the ECB highlighted that ‘About a third of outstanding commercial 
property mortgages in the euro area are due to mature be tween 2011 and 2013 … Many of th ese mortgages … were often 
granted with high loan-to-value ratios (often 75-85%)’. 
6  See paragraph 2.2 of Opinion CON/2011/58. 
7  Paragraph 3.1.1 of Opinion CON/2010/62. 
8  ESRB press conference of 22 June 2011.