WRITTEN QUESTION E-1420/02 by Erik Meijer (GUE/NGL) to the Commission. Abolition of multi-year fixed interest rates for loans to home-owners — an unintended side-effect of new book-keeping rules.
Date: 2002-05-23
Institutions: European Parliament, Provisional data
Subjects: balance sheet, bank, borrowing, consolidated account, interest, international market, mortgage, publication of accounts, standardised accounting system, type of business

C 92 E/54

Official Journal of the European Union

EN

17.4.2003

This principle is also applied for electronic publication: official documents of the Commission published
on the Europa web-site are provided in the eleven official languages.

The report ‘Undeclared labour in Europe. Towards an integrated approach of combating undeclared labour’
does not constitute a document adopted by the Commission, but is a final report of an external study
containing specialised information.

Thus, it has been published on the Europa website in its original language (English), together with a brief
summary in French and German.

It is, therefore, not the intention of the Commission to translate the report, which numbers 158 pages in
total, into the other official languages.

The Commission certainly considers it to be of the utmost importance to ensure that citizens of the Union
should be able to read the texts adopted at Union level in their own language and, as stated above, this it
strives to do. However, it is not possible to translate reports of external studies such as the report in
question. The publication of this report is a tangible proof of the Commission’s commitment to be
transparent and to make information public, including reports of external studies.

(2003/C 92 E/055)

WRITTEN QUESTION E-1420/02

by Erik Meijer (GUE/NGL) to the Commission

(23 May 2002)

Subject: Abolition of multi-year fixed interest rates for loans to home-owners (cid:1) an unintended side-effect

of new book-keeping rules

1.
Is the Commission aware that many people are only able to become owner-occupiers with the aid of
mortgage loans, which entail paying regular instalments of interest on a loan equivalent to the value of the
home or part of it?

2.
Can the Commission confirm that, as from 2005, the proposals for International Accounting
Standards will require European businesses and banks to record their assets annually at the market value
which obtains at the time (‘fair value’), for which purpose they will also constantly have to reassess their
mortgage portfolios in such a way that the value of fixed-interest mortgage claims will fall if interest rates
rise?

3.
As a result of this annual reassessment, is there a danger that in future mortgage loans will no longer
be made available at interest rates fixed for a relatively large number of years, because fluctuations in value
will result in fluctuations in profits, so that banks will no longer see any advantage in concluding fixed-
interest mortgage loan agreements?

4. What consequences is it likely to have if all or most mortgage loans are subject to variable interest
rates, so that the amounts which home-owners have to pay are liable to change radically from year to
year? Is this likely to discourage people from buying their own homes, to reduce the purchasing power
available for the acquisition of other goods, or to increase the number of bankruptcies because many
people will be unable to bear the risks of annual fluctuations?

5.
Are the new rules likely to create a situation in which businesses will continue to offer fixed-interest
mortgage loans because there is a demand for them, but the value of these mortgages will be determined
by a futures/options market, as a result of which the overheads on mortgage portfolio management will
increase?

6.
Is it desirable to protect those who are compelled to pay rent against the adverse consequences of
annual fluctuations and also to avoid other types of rise in costs to consumers? How can this be achieved?

Source: De Volkskrant (Dutch daily newspaper), 15 and 16 April 2002.

17.4.2003

EN

Official Journal of the European Union

C 92 E/55

Answer given by Mr Bolkestein on behalf of the Commission

(25 July 2002)

The Commission is fully aware that many people are only able to become owners-occupiers with the aid
of mortgage loans which entail regular instalments for interest.

The Commission cannot confirm that, from 2005 onwards when listed Community companies will be
required to use endorsed International Accounting Standards (IAS) for the preparation of their consolidated
accounts, banks and business will be required to measure their mortgage portfolios at fair value.

The relevant IAS 39 that deals with recognition and measurement of financial instruments at fair value
excludes the application of fair value for loans and receivables originated by the reporting company.
Therefore, the application of IAS 39 is not the cause of the suggested implications for fixed-interest
mortgage loans.

The limits to the scope of IAS 39 have been laid down in the pre-amble of Directive 2001/65/EC of the
Parliament and of the Council of 27 September 2001 amending Directives 78/660/EEC, 83/349/EEC and
86/635/EEC as regards the valuation rules for the annual and consolidated accounts of certain types of
institutions (1), that amongst others introduces the
companies as well as of banks and other financial
application of fair value within the Community. One of the preamble points makes explicit that financial
reporting on the basis fair value should only be appropriate for those items where there is a well
developed international consensus. At the moment, there is no consensus that fair value should be applied
to all financial assets and liabilities.

Finally, the minutes of the Council when the aforementioned Directive was adopted (31 May 2001)
includes a statement that application of IAS 39 does not serve to alter the provision of mortgage loans
with a fixed interest rate.

The Commission is aware that the International Accounting Standards Board (IASB) is working on an
improvement to the present IAS 39. The proposals for improvement do, as known by now, not modify
the scope of application of the fair value concept in such a way that it would have consequences for the
provision of fixed interest rate mortgage loans.

(1) OJ L 283, 27.10.2001.

(2003/C 92 E/056)

WRITTEN QUESTION E-1423/02

by Eluned Morgan (PSE) to the Commission

(23 May 2002)

Subject: Euro-Mediterranean Bank (EMB)

The Commission has expressed support for the creation of a Euro-Mediterranean Bank (EMB) as a
subsidiary of the European Investment Bank (EIB). Why is a separate EMB necessary, and why could not
the work of the EMB be carried out by the EIB directly?

Answer given by Mr Solbes Mira on behalf of the Commission

(9 July 2002)

In its Report adopted on 27 February 2002 in response to the request of the Council of Laeken of
December 2001 calling for an assessment of the setting up of a Euro-Mediterranean Bank, the Commission
considered various options to address the financing needs of Mediterranean Partner Countries. The report
favoured the setting up of an European Investment Bank (EIB) subsidiary for a number of reasons. A bank
structure would ensure ownership by and partnership with Mediterranean Partner Countries. The setting
up of a subsidiary would not only encompass the work that the EIB is already doing in the region, but it
would also enhance it and allow for the use of a wider variety of financial instruments. For instance, the
EIB cannot commit equity from its own resources for its operations for statutory reasons, while an EIB
subsidiary could potentially engage in such activities.