Opinion of the European Central Bank of 7 June 2017 on macro-prudential measures to limit systemic risks (CON/2017/21)
Date: 2017-06-07
Institutions: European Central Bank
Subjects: Austria, banking supervision, financial stability, financial supervision, national law, real estate credit

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 7 June 2017 

on macro-prudential measures to limit systemic risks 

(CON/2017/21) 

Introduction and legal basis 

On  21  April  2017  the  European  Central  Bank  (ECB)  received  a  request  from  the  Austrian  Ministry  of 

Finance (MoF) for an opinion on a draft law regarding macro-prudential measures to limit systemic risks 
in real estate financing (hereinafter the ‘draft law’)1.  

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  on  the  third,  fourth  and  sixth  indents  of  Article  2(1)  of  Council 
Decision 98/415/EC2, as the draft law relates to the Oesterreichische Nationalbank (OeNB), the collection 

of financial statistics and  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 Governing Council has adopted this opinion. 

1. 

Purpose of the draft law 

1.1.  The  purpose  of  the  draft  law  is  to  create  a  legal  basis  for  macro-prudential  tools  to  counteract 

systemic risks arising from third-party financing of property in Austria. In this respect, the draft law 

enables  the  Austrian  Financial  Market  Authority  (FMA)  to  impose  certain  measures  if  increased 

systemic risks arising from real estate financing are identified.  

1.2.  The application of the macro-prudential measures by the FMA requires a recommendation from the 

Austrian  Financial  Market  Stability  Board  (FMSB). Before  taking  the  relevant  measures,  the  FMA 

must  establish  the  necessary  evidence  and  conditions  for  systemic  risks  arising  from  third-party 

financing  of  property  threatening  financial  market  stability.  For  these  purposes,  the  FMA  has  to 

obtain  an  expert  opinion  from  the  OeNB  on  the  existence  of  the  necessary  evidence  and 

conditions.  The  FMA  also  needs  to  obtain  the  MoF’s  permission  before  issuing  the  relevant 

measures.  Lastly,  the  FMA  has  to  inform  the  European  Systemic  Risk  Board  (ESRB)  about  the 

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Bundesgesetz, mit dem ein Bundesgesetz über die Errichtung eines Registers der wirtschaftlichen Eigentümer von 
Gesellschaften,  anderen  juristischen  Personen  und  Trusts  (Wirtschaftliche  Eigentümer  Registergesetz  –  WiEReG) 
erlassen  wird  und  das  Finanzmarkt-Geldwäschegesetz,  das  Finanzstrafgesetz,  das  Wirtschaftstreuhändergesetz, 
das  Bilanzbuchhaltungsgesetz  2014,  das  Devisengesetz,  das  Zentrale  Gegenparteien-Vollzugsgesetz,  das 
Zentralverwahrer-Vollzugsgesetz,  das  Börsegesetz  1989,  das  Bankwesengesetz  und  die  Bundesabgabenordnung 
geändert werden. The draft law is part of a larger legislative package mainly aimed at implementing Directives (EU) 
2015/849 and 2016/2258. 

Council  Decision  98/415/EC  of  29  June  1998  on  the  consultation  of  the  European  Central  Bank  by  national 
authorities regarding draft legislative provisions (OJ L 189, 3.7.1998, p. 42). 

 
 
 
 
                                                 
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existence of the relevant systemic risks. 

1.3.  The FMA may take macro-prudential measures, by way of a regulation, setting limits for all or some 

credit institutions. For these purposes, the FMA may establish the following provisions: 

 

upper limits for the ratio of the total credit obligations of a borrower resulting from third-party 

financing of property with respect to the relevant credit institution to the total market value of 

the  property  acting  as  security  for  the  borrowing,  less  prior  liens  on  the  property  (loan-to-

value ratio – LTV); 

 

upper limits for the ratio of the total of a borrower’s repayment obligations to income in the 

case of natural persons, or to cashflow or another suitable financial indicator in the case of 

legal entities, within a particular period (debt-to-income ratio – DTI); 

 

upper limits for the  ratio of the total interest payments and repayments to service all of the 

borrower’s credit obligations falling due in a particular period to income in the case of natural 

persons,  or  to  cashflow  or  another  suitable  financial  indicator  in  the  case  of  legal  entities, 

within this period (debt service-to-income ratio – DSTI); in the case of interest-only loans, for 

calculation purposes a regular repayment is to be assumed, distributed equally over the term 

of the loan; 

 

 

 

requirements  on  the  maximum  term  of  third-party  financing  of  property  (term  restriction), 

subject to the proviso that the term restriction must be not less than ten years; 

periods within which a specified proportion of the entire loan disbursed to the borrower must 

be repaid (i.e. a repayment requirement); and 

provisions  for  the  purposes  of  the  national  application  of  measures  from  other  Member 

States and third countries that serve to limit systemic risks arising from third-party financing 

and are comparable to the national measures. 

1.4.  The FMA may restrict the material and geographical scope of the measures in particular to certain 

types  of  property  use,  the  property  location  or  the  purposes  of  the  property  financing.  The  FMA 

may  also:  (a)  determine  different  upper  limits  according  to  the  type  and  amount  of  financing;  (b) 

determine  a  proportion  of  new  business  relating  to  third-party  financing  of  property  by  a  credit 

institution  that  is  excluded  from  the  application  of  the  measures  (known  as  the  new  business 

exception);  and  (c)  exclude  third-party  financing  of  property  up  to  a  specified  maximum  amount 

from the application of measures (known as the lower limit threshold). Furthermore, the FMA may 

determine  specific  calculation  methods,  in  particular  in  respect  of  ratios,  the  new  business 

exception  and  lower  limit  threshold,  interest-only  loans,  foreign  currency  loans  or  loans  with 

repayment vehicles.  

1.5.  A regulation issued by the FMA may apply for up to two years. Prior to the expiry of the measures, 

the  FMA  must  evaluate  them  and,  if  the  conditions  for  the  application  of  the  measures  still  exist, 

may extend the regulation by one year.  

1.6.  The  draft  law  also  amends  the  Law  of  2004  on  foreign  exchange  to  provide  that  the  relevant 

statistical reports submitted to the OeNB must be made in a standardised format and by electronic 

means  only,  subject  to  minimum  requirements  set  by  the  OeNB.  Under  existing  law,  the  OeNB 

does not have the power to require notifications relating to foreign currency statistics to be provided 

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in  electronic  form  only.  The  processing  of  notifications  in  paper  form  is  currently  causing  a 

considerable amount of additional effort which will be avoided by introducing this new requirement 

ECB-PUBLIC 

for electronic form. 

2. 

Observations 

2.1  The draft law entails a role for the OeNB to advise on the presence of the necessary evidence and 

conditions  for  systemic  risks  arising  from  third-party  financing  of  property  threatening  financial 

market stability. The draft  law  provides for  no  additional  tasks  other  than  this  advisory role in  the 

field  of  macro-prudential  oversight.  Under  the  current  legal  framework,  the  OeNB  already  has  a 

broad  financial  stability  mandate  to  monitor  all  circumstances  that  may  have  an  impact  on 
safeguarding  financial  stability  in  Austria3.  This  mandate  includes    reducing  systemic  and 

procyclical  risk  in  Austria,  in  particular  by  analyzing    the  financial  market  facts  relevant  for 

maintaining financial stability and reducing  systemic  risk,    identifying threats to financial  stability, 

reporting observations and findings of a fundamental nature or of special significance to the FMSB 

and,  on  request,    providing  any  factual  clarifications  and  relevant  documents  that  appear 

necessary,   drafting  opinions and   proposing to the  FMSB the  adoption  of recommendations and 

risk warnings to be submitted to the FMA.  

2.2  The  OeNB  also  assesses  FMA’s  implementation  measures  and  presents  its  assessment  to  the 

FMSB. It is required to draw up and provide to the FMSB an annual financial stability report on the 
situation and the developments with regard to financial stability4. In addition, the FMA may obtain 

expert opinions from the OeNB in relation to other macro-prudential measures provided for in the 

Law  on  banking,  e.g.  countercyclical  capital  buffers  or  systemic  risk  buffers.  It  follows  that  the 

provisions  of  the  draft  law  that  relate  to  the  OeNB  should  be  seen  as  falling  within  the  same 

category  of  tasks  as  the  other  advisory  tasks  already  discharged  by  the  OeNB  under  its  macro-

prudential  and  financial  stability  mandate.  Therefore,  for  the  purpose  of  assessment  against  the 

monetary  financing  prohibition,  the  ECB  concludes  that  the  draft  law  does  not  confer  a  new  task 

upon the OeNB. 

2.3  The ECB welcomes that recommendations made by the FMSB aiming at creating macro prudential 

tools  that  establish  restrictions  on  the  third-party  financing  of  real  estate  will  be  implemented  by 
amending the Law on banking5. 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  law  seem  appropriate,  namely  to  create  instruments 

that  enable  the  FMA  to  impose  certain  minimum  standards  upon  lenders  in  connection  with  real-

estate  financing,  with  a  view  to  strengthening  the  resilience  of  the  financial  system  and  to 

counteracting  the  cyclical  build-up  of  systemic  risks,  when  deemed  necessary.  The  objectives  of 

the  draft  law  are  also  in  line  with  the  principles  set  out  in  the  ESRB’s  Recommendation  on 

3  
4  
5  

See section 44b(1) of the Law of 1984 on the national bank. 
See section 44b(3) and section 44c(1) of the Law of 1984 on the national bank. 
See paragraph 2.2 of Opinion CON/2017/11. All ECB opinions are available on the ECB’s website at 
www.ecb.europa.eu. 

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intermediate objectives and instruments of macro-prudential policy, in particular with regard to the 
objective to mitigate and prevent excessive credit growth and leverage6. 

2.4  From  a  financial  stability  perspective,  the  ECB  welcomes  the  implementation  of  a  legislative 
framework  for  borrower-based  measures  in  all  euro  area  countries7.  The  measures  contained  in 

the draft law enabling the FMA to create macro-prudential tools to counteract potential risks 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.  The  ECB  understands  that  the  draft  law 

establishes a legal basis for imposing certain minimum standards upon lenders in connection with 

the granting of property loans. The different instruments envisaged by the draft law would allow the 

FMA  to  activate  only  one,  all  or  a  combination  thereof  of  instruments  depending  on  the 

circumstances  threatening  financial  stability.  This  would  enable  the  FMA  to  respond  in  a  flexible 

and proportionate way to potential risks to financial stability. Nevertheless, a thorough quantitative 

impact assessment would be relevant to ascertain the effect and appropriateness of the draft law. 

Also,  a  regular  review  of  the  LTV,  DTI  and  DSTI  ratios  would  allot  to  take  into  account  the 

implications of changes in macro-economic and financial conditions. The scope of exemptions from 

the draft law or from specific provisions thereof should be proportionate to the overall objective to 

curb  excessive  lending  for  the  construction  and  purchase  of  property  and  prevent  over-
indebtedness8. 

This opinion will be published on the ECB’s website. 

Done at Frankfurt am Main, 7 June 2017. 

[signed] 

The President of the ECB 

Mario DRAGHI 

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7  

8  

See paragraph 2.2 of Opinion CON/2017/11 and Recommendation of the European Systemic Risk Board of 4 April 
2013 on intermediate objectives and instruments of macro-prudential policy (ESRB/2013/1) (OJ C 170, 15.6.2013, 
p. 1). 
See the Governing Council statement on macro-prudential policies of 15 December 2016 and paragraph 2.3 of 
Opinion CON/2017/11. 
See paragraph 2.3 of Opinion CON/2017/11. 

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