Opinion of the European Central Bank of 15 June 2018 on mortgage amortisation requirements (CON/2018/30)
Date: 2018-06-15
Institutions: European Central Bank
Subjects: Sweden, amortisation, credit institution, financial stability, national law, real estate credit

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 15 June 2018 

on mortgage amortisation requirements 

(CON/2018/30) 

Introduction and legal basis 

On  19  April  2018,  the  European  Central  Bank  (ECB)  received  a  request  from  Finansinspektionen  (the 

Swedish financial supervisory authority) for an opinion on a draft proposal for an amendment to existing 

mortgage amortisation requirements (hereinafter the ‘draft proposal’). 

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 indent of Article 2(1) of Council Decision 98/415/EC1, as 

the draft proposal contains 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 proposal 

1.1  The  overall  purpose  of  the  draft  proposal  is  to  counteract  macroprudential  and  financial  stability 

risks  associated  with  excessive  indebtedness,  to  further  increase  households’  resilience  to 

macroprudential  disturbances  and  to  harmonise  the  rules  applicable  to  institutions  providing 

mortgages  for  the  domestic  housing  market  in  Sweden.  In  particular,  under  the  draft  proposal 

existing  mortgage  amortisation  requirements  applicable  to  credit  institutions  which  operate  under 
the Banking and Finance Business Act (BFA)2 (i.e. banks, savings banks, cooperative banks and 

other  credit  institutions)  and  provide  mortgages  in  the  domestic  housing  market  in  Sweden    will 
also apply to credit providers operating under the Mortgage Credit Business Act (MCA)3.  

1.2 

In 2016, Finansinspektionen introduced a progressive amortisation requirement  based on a loan-
to-value ratio4, and in March 2018 an additional amortisation requirement was introduced based on 
the  debtor´s  debt-to-income  ratio5  (hereinafter  together  the  ‘existing  mortgage  amortisation 

requirements’).  

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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). 
(Sw. Lag (2004:297) om bank- och finansieringsrörelse. 

Lag (2016:1024) om verksamhet med bostadskrediter. 
See Opinion CON/2016/18. All ECB opinions are published on the ECB’s website at www.ecb.europa.eu.  

See Opinion CON/2017/29. 

 
 
 
 
 
                                                 
ECB-PUBLIC 

1.3  Following the introduction of the first amortisation requirement in 2016, Directive 2014/17/EU of the 
European  Parliament  and  of  the  Council6  (hereinafter  the  ‘Mortgage  Credit  Directive’),  was 

implemented in Sweden through the MCA. The MCA provides that creditors acting under the MCA 

must  impose  repayment  requirements  that  are  compatible  with  a  sound  amortisation  culture  and 
that  counteract  excessive  household  indebtedness7.  The  draft  amendment  will  have  the  effect  of 

aligning mortgage amortisation requirements applicable to creditors operating under the MCA with 

the existing amortisation requirements applicable to credit institutions operating under the BFA. 

1.4 

In  addition,  the  draft  amendment  introduces  an  exemption  from  the  mortgage  amortisation 

requirements for amortisation-free mortgages which are granted for an undefined term and repaid 

only when the debtor sells the property due to old age, failing health or death (typically granted to 

elder citizens and referred to as “equity release credits”). The Mortgage Credit Directive specifically 
states that the Directive will not apply to equity release credit agreements8, therefore implying that 

creditors acting under the MCA may be permitted to offer equity release credits. In order to allow 

credit  institutions  operating  under  the  BFA  to  operate  on  the  same  terms  and  on  a  level  playing 

field,  the  draft  proposal  provides  the  option  to  all  creditors  to  exclude  equity  release  credits  from 

amortisation requirements.  

1.5  Finally,  the  procedure  for  the  adoption  of  the  draft  proposal  is  the  same  as  for  the  existing 
mortgage  amortisation  requirements9.  This  means  that  Finansinspektionen  must  obtain  the 
Government´s consent before the draft amendment enters into force10. 

2. 

General observations  

2.1  The ECB welcomes the core objectives of the draft proposal, namely to limit excessive household 

indebtedness  and  to  counteract  macroprudential  and  financial  stability  risks,  as  well  as  to  further 
increase  households’  resilience in relation to macroprudential instabilities11. The  harmonisation  of 

the  applicability  of  existing  mortgage  amortisation  requirements  helps  to  reduce  regulatory 

arbitrage as between credit institutions operating under the BFA and creditors operating under the 

MCA. 

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Directive 2014/17/EU of the European Parliament and of the Council of 4 February 2014 on credit agreements for 
consumers  relating  to  residential  immovable  property  and  amending  Directives  2008/48/EC  and  2013/36/EU  and 
Regulation (EU) No 1093/2010 (OJ L 60, 28.2.2014, p. 34). 
Chapter  4,  section  12(a)  of  the  Mortgage  Credit  Business  Act  (Sw.  Lag  (2016:1024)  om  verksamhet  med 
bostadskrediter) and Opinion CON2017/14. 
Point 2 of Article 3, of Directive 2014/17/EU of the European Parliament and of the Council of 4 February 2014 on 
credit  agreements  for  consumers  relating  to  residential  immovable  property  and  amending  Directives  2008/48/EC 
and 2013/36/EU and Regulation (EU) No 1093/2010. 
Chapter  16,  section  1  of 
(Sw.  Bank-  och 
Finansieringsrörelselagen);  chapter  7,  section  1  of  the  Mortgage  Credit  Business  Act  (Sw.  Lag  (2016:1024)  om 
verksamhet  med  bostadskrediter);  chapter  5,  section  2  of  the  Regulation  on  Swedish  Banking  and  Financing 
Business  (Sw.  Förordning  (2004:329)  om  bank-  och  finansieringsrörelse)  and  section  12  of  the  Mortgage  Credit 
Business Regulation (Sw. Förordning (2016:1033) om verksamhet med bostadskrediter). 
Chapter 5, Section 2a of the Regulation on Swedish Banking and Financing Business (Sw.  Förordning (2004:329) 
om bank- och finansieringsrörelse) and Section 13 of the Regulation on Mortgage Credit Business Regulation (Sw. 
Förordning (2016:1033) om verksamhet med bostadskrediter). 
See paragraph 2.1 of ECB Opinion CON/2016/18 and paragraph 2.1 of ECB Opinion CON/2017/29. 

the  Swedish  Banking  and  Financing  Business  Act 

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2.2  The  ECB  notes  that  equity  release  credits  are  exempted  from  amortisation  requirements  as  the 

Mortgage Credit Directive permits creditors operating under the MCA to offer equity release credits. 

In  this  regard,  the  ECB  suggests  that  the  Swedish  authorities  thoroughly  analyse  the  potential 

implications  of  this  exemption  for  credit  and  property  markets  and  regularly  assess  whether 

maintaining the exemption is justified in view of potential risks to financial stability, the safety and 

soundness  of  the  banking  system  and  distortions  to  competition,  or  whether  mitigating  actions 

might be required. 

2.3  The ECB refrains from making any observations regarding the possible institutional implications for 

Finansinspektionen’s  operational  independence  as  a  macroprudential  authority  arising  out  of  the 

requirement that Finansinspektionen must obtain the Government’s consent before any regulations 
on amortisation requirements enter into force12. 

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

Done at Frankfurt am Main, 15 June 2018. 

[signed] 

The President of the ECB 

Mario DRAGHI 

12 See paragraph 2.2 of ECB Opinion CON/2016/18 and paragraph 2.3 of ECB Opinion CON/2017/29. 

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