EN ECB -PUBLIC  
 
OPINION OF THE EUROPEAN CENTRAL BANK  
of 8 January 2020   
on measures limiting macroprudential  risks in residential property loans  
(CON/ 2020/1) 
 
Introduction and legal basis  
On 27 November 2019  the European Central Bank (ECB) received a request from the Germ an Ministry of 
Finance  for an opinion on a draft r egulation on the implementation of measure s to limit macroprudential 
risks in the residential property construction and acquisition loan sector (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  third and sixth indents  of Article  2(1) of Council Decision 
98/415/EC1, as the draft regulation  relates to the Deutsche Bundesbank and  to rules applicable 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 Govern ing Council has adopted this opinion.   
 
1. Purpose of the draft regulation  
1.1 According to its explanatory memorandum , the draft regulation sets out  detailed rules specify ing 
new measures  available to the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin , Federal 
Financial Supervisory Authority ) to impose certain minimum standards upon lenders to limit 
macroprudential risks from residential property construction or acquisition loans, including 
provisions on cooperation between  BaFin and the Deutsche Bundesba nk in the adoption of these 
measures . The draft regulation  aims to provid e commercial lenders with legal certainty in relation to  
these new measures and the opportunity to prepare for their application, irrespective of which 
instruments are applied in the future . 
1.2 As regards  cooperation between BaFin and the Deutsche Bundesbank, the draft regulation 
provides that the Deutsche Bundesbank must  notify BaFin  immediately  if it concludes on the basis 
of its financial stability analyses that due to a systemic risk in the residential property construction 
or acquisition loan sector, the functioning of the financial system may be disrupted or financial 
stability jeopardised. In light  of this noti fication  and/or its own observations , BaFin may decide to 
draft a general  administrative order ( Allgemeinverfuegung ) containing specific measures . Any  
 
                                                 
1  Council Decision 98/415/EC of 29  June 1998 on the consultation of the Europe an Central Bank by national 
authorities regarding draft legislative provisions ( OJ L 189, 3.7.1998, p. 42). 
ECB -PUBLIC  
2 imposition of r estrictions  requires  close collaboration between BaFin and the Deutsche 
Bundesbank, and restriction s must  be calibrated in agreement with the Deutsche Bundesban k. The 
Deutsche Bundesbank also is required to assist BaFin with the review which B aFin has to  conduct 
at least every six months where restrictions are in place in order to determine if , and to what extent , 
systemic risks still exist and if the related measures are still required.  
1.3 Section 48u of the Law on banking2, Section 308b of the Law on i nsurance supervision3 and 
Section 5(8a) of the Investment Code4 authorise BaFin to impose certain minimum standards upon 
lenders in connection with the granting of ne w loans for the construction or acquisition of residential 
property , including an upper limit regarding the ratio between the amount of the loan and the value 
of the immovable property ( the loan-to-value (LTV) ratio) and t he specification of a period of ti me 
within which a specific propor tion of the loan must be repaid, or , in the case of loans d ue for 
repayment on a due date at the end of the term, a maximum term ( amortisation requirement).  The 
draft regulation  provides definitions that influence the scope  of applicatio n of any measures to be 
taken.  The draft regulation  also provides detailed instruction s on how to apply the loan -to-value 
ratio and the amortisation requirement.  
1.4 Section 48u of the Law on banking  provides that, if measures are applied, BaFin must  specify in its 
general administrative order which proportion of a credit institution’s new lending business for 
residential property within a specific period is not subject to the restrictions established ( ‘the free 
quota ’). For this purpose the draft  regulation clarifies that this is a uniform free quota applicable to 
all lender s, and specifies further details regarding its application.  
1.5 The Law on b anking  provides that, if measures are applied, BaFin must  specify in its general 
administrative order the loan amount up to which one or more restrictions do not apply ( ‘the de 
minimis  threshold ’), with an upper limit for the share of the loan volume that may be issued under 
the de minim is threshold in relation to the total amount of new residential immovabl e property 
lending business of a single  lender during a specific period . The de minimis  threshold specified by 
BaFin must be at least EUR 50 000, but may be higher . Therefore the possibility to grant loans 
without restrictions by reference to the de minimi s threshold is capped both in terms of  the absolute 
amount a nd by the upper limit on the max imum possib le percentage of such loans in relation to all 
new residential property loans granted by a single  lender.  The draft regulation further specifies  that 
the de minimis  limit applies to the total sum of loans advanced to a single borrower to finance 
residential property .  
1.6 The Law on banking  provides that, if measures are applied, BaFin must  specify in its general 
administrative order the value of the property up to  which a loan is exempt from the restrictions 
provided that the loan claims of the lender are secured by a mortgage or land charge on the 
residential property not exceeding  80 percent of the value of the property ( ‘the lower threshold ’) or 
not exceedi ng 60 percent of the value of the property ( ‘the higher threshold ’). The lower threshold 
must be at least EUR 200 000 and the higher threshold must be at least EUR 400 000. In order to 
                                                 
2  Kreditwesengesetz . 
3  Versicherungsaufsichtsgesetz . 
4  Kapitalanlagegesetzbuch . 
ECB -PUBLIC  
3 prevent circumvention of this threshold, t he draft regulation further s pecifies that the total sum of 
loans granted must be taken into account . In addition, t he draft regulation  clarifies that, for this 
purpose,  the mortgage lending value , which is the current value of the residential property 
determined in accordance with th e requirements of Section 22 of the Solvency Regulation5, has to 
be taken into account. The explanatory memorandum further clarifies that  the purpose of the 
exceptions for these loans is to establish legal certainty that well-secured property loans a re not  
subject to restrictions.  
 
2. General observations  
2.1 The ECB welcomes the fact that legal certainty is increased  with respect to possible restrictions 
imposed upon lenders in connection with the granting of new loans for the construction or 
acquisition of r esidential property .  
2.2 The ECB recalls  that, in its opinion on the amendment of German financi al supervisory law6, it 
welcomed the creation of macroprudential tools regarding the granting of new loans for the 
construction or purchase of residential prop erty. Imbalances in the residential immovable property 
sector that could result from overvaluation of residential property accompanied by excessive credit 
provision can have significant negative implications for financial stability and the real economy. 
Against this background, the core objectives of the draft regulation  seem appropriate, namely to 
further specify  instruments that enable BaFin to impose certain minimum standards upon lenders in 
connection with the issuance of new residential mortgage loans,  with a view to strengthening the 
resilience of the financial system and to counteracting the cyclical build -up of systemic  risks, when 
deemed necessary. These objectives are also in line with the principles set out in the European 
Systemic Risk Board’s Re commendation on intermediate objectives and instruments of 
macroprudential policy7, in particular with regard to the objective to mitigate and prevent excessive 
credit growth and leverage.  
2.3 From a financial stability perspective,  the ECB welcomes the im plementation of a legislative 
framework for borrower -based measures  in all euro area countries.  The measures contained in the 
draft regulation  enabling BaFin to create macroprudential tools  to counter act potential risk s to the 
stability of the national financial system  seem appropriate to the extent  that they aim at promoting 
responsible borrowing and lending, enforcing market discipline, reducing credit  risk and increasing 
the transparency of credit institutions’ activities. A thorough quantitative impact assessment is, 
however, important to verify the effect and appropriateness of the  draft law , as well as a regular 
review of the LTV ratio  to take into account the implications  of changes in macroeconomic and 
financial conditions. The scale of exemptions fr om the scope or  specific provisions should be 
                                                 
5  Solvabilit ätsverordnung.  
6  See paragraph 2.2 of Opinion CON/2 017/11. All ECB opinions are available on the ECB website at  
www.ecb.europa.eu . 
7  Recommendation of the European Systemic Risk Board of 4 April 2013 on intermediate objectives and instrume nts 
of macro -prudential policy (ESRB/2013/1) (OJ C 170, 15.6.2013, p. 1).  
ECB -PUBLIC  
4 proportionate to the overall objective to be  achieved, which is to curb excessive lending for the 
construction and purchase of residential property  and prevent over -indebtedness8. 
2.4 The draft amendment to the Law on banking  on which the ECB was consulted in 2017 included  
(1) the LTV , (2) the amortisation requirement , (3) an upper limit upon the total servicing of all debts 
in proportion to the borrower’s income (debt -service -to-income – DSTI) or, where the borrowe r is 
not a natural person (e.g. a company), a lower limit upon the proportion of the borrower’s inflows of 
funds to the borrower’s debt servicing obligation within a specific time frame (debt -service cov erage 
ratio – DSCR) and ( 4) an upper limit for the ra tio of overall indebtedness to the borrower’s income 
(debt -to-income ratio – DTI). Of the se four measures only two , the LTV and the amortisation 
requirement , were finally adopted. As previously noted by the ECB , the four different instruments 
originally envisaged would allow BaFin to either activate only one or a combination of or all these 
instruments, depending on the circumstances jeopardising financial stability. The availability of a 
comprehensive  set of borrower -based measures, including the income -based measures, would  
enable  BaFin to respond in a flexible and proportionate way  in relation to potential risks to financial 
stability9.  
2.5 As previously noted , there is still a need to ensure the availability of harmonised data on all types of 
relevant comme rcial lenders whose lending for the construction or purchase of residential property 
is subject to the instruments when activated, e.g. for the regular monitoring of financial stability 
risks and impact assessment purposes10. 
2.6 As previously noted, the genera l administrative order should be simple, easily applicable by both 
commercial lenders and borrowers and easy to understand11. 
2.7 The ECB welcomes the role that is assigned to the Deutsche Bundesbank under the draft 
regulation. The Deutsche Bundesbank is well  positioned to provide data and expertise in the sector 
of residential property loans. Both Recital 24 of Regulation (EU) No 1092/2010 of the European 
Parliament and of the Council12 and the Recommendation of the European System Risk Board on 
the macroprudent ial mandate of national authorities13 refer to the fact that  the ECB and the national 
central banks should play a leading role in macroprudential oversight, given their expertise and 
existing responsibilities in the area of financial stability.  
2.8 As a nationa l macroprudential authority, the Deutsche Bundesbank is already responsible for 
macroprudential tasks in order to maintain the stability of the banking system14. The draft law does 
not confer genuinely new tasks on the Deutsche Bundesbank, but rather specif ies certain new 
macroprudential tools that the Deutsche Bundesbank may use when discharging its 
                                                 
8  See paragraph 2 .3 of Opinion CON/2017/11.  
9  See paragraph 2.3  of Opinion CON/2017/11.  
10  See paragraph 2.5 of Opinion CON/2017/11.  
11  See paragraph 2.6 of Opinion CON/2017/11.   
12  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 Eur opean Systemic Risk Board (OJ 
L 331, 15.12.2010, p. 1).  
13  Recomm endation of the European Systemic Risk Board of 22 December 2011 on the macro -prudential mandate of 
national authorities (ESRB/2011/3) (OJ C 41, 14.2.2012, p. 1).  
14  See Section 1 of the Law on the monitoring of financial stability  of 28 N ovember 2012 (B undesgesetzblatt  I p. 2369 ). 
ECB -PUBLIC  
5 macroprudential responsibilities. Consequently, the re is no  conferral of new tasks on the Deutsche 
Bundesbank which must  be assessed for compli ance  with the pro hibition of monetary financing.  
 
This opinion will be published on the ECB’s website.  
 
 
Done at Frankfurt am Main, 8 January 2020 . 
 
[signed]  
 
The President of the ECB  
Christine  LAGARDE