Opinion of the European Central Bank of 4 March 2022 on macroprudential measures (CON/2022/8)
Date: 2022-03-04
Institutions: European Central Bank
Subjects: financial stability

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 4 March 2022  

on macroprudential measures 

(CON/2022/8) 

Introduction and legal basis 

On 31 January 2022 the European Central  Bank (ECB) received a request from the Finnish Ministry of 

Finance for an opinion on a draft Law on certain macroprudential measures (hereinafter the ‘draft law’). 

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/EC 1, as 

the  draft  law  relates  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 Governing Council has adopted this opinion. 

1. 

Purpose of the draft law 

1.1  The purpose of the draft law is to curb the growth of the direct and indirect indebtedness of private 

individuals and households and to safeguard financial stability in Finland. The draft law intends to 

prevent the extension of the repayment times of household mortgage loans, limit excessive lending 

in  particular  to  housing  companies,  promote  customer  protection  and  improve  credit  granting 

processes related to other consumer lending.  

1.2 

In  particular,  the  draft  law  proposes  that  the  current  provisions  on  the  loan-to-value  (LTV)  ratio 

regarding mortgage loans applicable to credit institutions are extended to apply to lenders who fall 

within the scope of the Law on the registration of certain lenders and credit intermediaries 2. As with 

the current LTV ratio limit applicable to credit institutions, the size of the mortgage loan would be 

limited to 90 % of the available collateral (or, in the case of first-time buyers, 95 %). According to the 

draft  law,  the  Board  of  the  Finnish  Financial  Supervisory  Authority  (FIN-FSA)  would  be  given  the 

power  to  decrease  the  maximum  LTV  ratio amount  by  a  maximum  of  10  percentage  points.  The 

provision would apply where the risks to financial stability are growing exceptionally. According to 

the explanatory memorandum accompanying the draft law, the limit of the maximum amount of the 

reduction  of  the  LTV  ratio  restricts  the  discretion  of  FIN-FSA  in  line  with  applicable  constitutional 

requirements. FIN-FSA would also have power to decide on restrictions on the use of certain forms 

of credit protection (e.g. guarantees and credit insurance) in the calculation of the LTV ratio under 

the  Law  on  the  registration  of  certain  lenders  and  credit  intermediaries.  FIN-FSA  would  have  the 

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2  

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). 

Laki eräiden luotonantajien ja luotonvälittäjien rekisteröinnistä 14.10.2016/853. 

 
 
 
 
 
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power to regulate specific situations where the LTV ratio can be derogated from as well. The new 

powers would correspond to the powers the Board of FIN-FSA already exercises regarding the LTV 

ratio applicable to credit institutions. 

1.3  The draft law proposes that a maximum loan period of 30 years be applied to residential mortgages. 

However, in each calendar quarter 10 % of the total amount of a lender’s loans would be allowed to 

exceed the 30-year limit. 

1.4  According to the draft law loans granted to housing companies, in the event of the construction of 

new residential properties, would be limited to 60 % of the value of the debt-free sales price of the 

shares of the housing company. Such loans would also be subject to the 30-year limit on the loan 

period, and it would be prohibited to allow amortisation-free years of the housing company’s loan 

during the first five years after the building has been put into use. 

1.5  According 

to 

the  explanatory  memorandum  accompanying 

the  draft 

law,  alternative  or 

complementary measures to limit the indebtedness of households that were assessed, but ultimately 

not  included  in  the  draft  law,  include  the  possibility  for  an  upper  limit  on  the  ratio  of  overall 

indebtedness to the borrower’s income. 

1.6  The draft law also proposes to introduce provisions concerning the management of insolvency risks 

when granting consumer credit aimed at clarifying the principles and procedures related to granting 

loans and the protection of customers. 

1.7  Finally, according to the draft law, FIN-FSA would be given supervisory responsibility over the entities 

that  must  be  registered  under  the  current  Law  on  the  registration  of  certain  lenders  and  credit 

intermediaries. This would include supervising compliance with registration requirements, consumer 

protection provisions and anti-money laundering provisions. The supervisory powers and supervisory 

fees of FIN-FSA would be expanded accordingly. 

2. 

General observations  

2.1  The ECB recalls that in its previous opinion on macroprudential oversight in Finland3 it expressed its 

support for the design of effective macroprudential policy frameworks within Member States, in line 

with the guiding principles set out in Recommendation ESRB/2011/3 of the European Systemic Risk 

Board 4.  

2.2  The  ECB  notes  that  the  objectives  of  the  draft  law  are  in  line  with  the  principles  set  out  in  the 

European Systemic Risk Board’s Recommendation on intermediate objectives and instruments of 

macroprudential policy, in particular with regard to the objective to mitigate and prevent excessive 

credit growth and leverage5. 

3  
4   

5  

See Opinion CON/2013/82. All ECB opinions are available on EUR-Lex. 
Recommendation ESRB/2011/3 of the European Systemic Risk Board of 22 December 2011 on the macro-prudential 
mandate of national authorities (OJ C 41, 14.2.2012, p. 1). 
See  paragraph  2.2  of  Opinion  CON/2017/11  and  Recommendation  ESRB/2013/1  of  the  European  Systemic  Risk 
Board of 4 April 2013 on intermediate objectives and instruments of macro-prudential policy (OJ C 170, 15.6.2013, 
p. 1). 

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3. 

Specific observations  

3.1  As emphasised in previous opinions 6, and in the Governing Council statement on Macroprudential 

Policies,7 from a financial stability perspective, the ECB supports the implementation of a legislative 

framework for borrower-based measures in all euro area member countries. Against this background, 

the ECB welcomes the draft law’s proposed extension of the provisions on the LTV ratio, that are 

currently applicable to credit institutions, to non-credit institution lenders8. 

3.2  The ECB also takes note of the definition that is used for the LTV ratio in Finland. More specifically, 

differing from what is prescribed in Recommendation ESRB/2019/8 of the European Systemic Risk 

Board 9, the LTV ratio is defined in a manner that allows assets other than real estate assets to be 

considered as collateral.  

3.3  Regarding  FIN-FSA’s  power  to  reduce  the  maximum  amount  of  the  LTV  ratio  by  a  maximum  of 

10 percentage  points,  in  general,  the  ECB  stresses  that  the  relevant  authorities  should  have  the 

capacity  to  act  in  a  flexible  and  proportionate  way  when  setting  and  calibrating  macroprudential 

measures.  This  will  enable  them  to  effectively  and  efficiently  address  potential  risks  to  financial 

stability10, while acting within the preestablished legal framework. The ECB understands that the limit 

on the maximum amount of the reduction of the LTV ratio is intended to restrict the discretion of FIN-

FSA  in  view  of  applicable  constitutional  requirements.  Available  information  on  borrower-based 

measures adopted by other Member States 11 suggests that the lower limits of the foreseen LTV ratio 

under the draft law are close to the ratios that are applied in most of those Member States. In that 

context, a reduction of the current lower limit of the LTV ratio, to the extent possible within the national 

constitutional framework, would ensure effective policy action, taking into account changing macro-

financial conditions. Such a reduction of the lower limit would also allow for the potential application 

of stricter limits, for instance for buy-to-let purposes, for non-first-time buyers, as well as under stress 

scenarios.  Finally,  the  ECB  suggests  a  regular  review  of  the  limit  to  allow  FIN-FSA  to  take  into 

account policy experience and the implications of changes in macroeconomic and macro-financial 

conditions 12.  

3.4  The ECB  again recalls its  support for the implementation of  a  legislative framework for borrower-

based measures in all euro area member countries 13, which are known to be effective in addressing 

risks. The availability of a comprehensive set of borrower-based measures, including income-based 

6  

7  

8  

9 

See  paragraph  2.3  of  Opinion  CON/2017/11,  paragraph  2.4  of  Opinion  CON/2017/21,  paragraph  3.2  of  Opinion 
CON/2018/9, paragraph 2.1 of Opinion CON/2019/34 and paragraph 2.3 of Opinion CON/2020/1. 
See Real estate risks section of the Governing Council statement on Macroprudential Policies, available on the ECB 
website at www.ecb.europa.eu.  

Lenders falling within the scope of the Law on the registration of certain lenders and credit intermediaries (including 
entities, which grant consumer loans and loans to housing associations).  

Recommendation ESRB/2019/8 of the European Systemic Risk Board of 27 June 2019 on medium-term vulnerabilities 
in the residential real estate sector in Finland (OJ C 366, 30.10.2019, p.29). 

See paragraph 2.3 of Opinion CON/2017/11 and paragraph 3.1 of Opinion CON/2019/34. 

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11    Due  to  the  lack  of  harmonisation  of  borrower-based  measures  and  the  related  statistical  data,  there  is  limited 
information  available  to  compare  these  measures  across  Member  States.  See  Overview  of  national  measures  of 
macroprudential interest, ESRB, available on the ESRB website at www.esrb.europa.eu. 

12  

13  

See  paragraph  2.3  of  Opinion  CON/2017/11,  paragraph  2.4  of  Opinion  CON/2017/21,  paragraph  2  of  Opinion 
CON/2016/8, paragraph 3.1 of Opinion CON/2019/34 and paragraph 2.3 of Opinion CON/2020/1. 
See Real estate risks section of the Governing Council statement on Macroprudential Policies, available on the ECB 
website at www.ecb.europa.eu.   

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measures, would enable FIN-FSA to respond in a flexible and proportionate way to potential risks to 

financial stability 14. The inclusion of such measures into the Finnish legislative framework would be 

also  in  line  with  the  actions  prescribed  in  the  aforementioned  country-specific  Recommendation 

ESRB/2019/8 of the European Systemic Risk Board. 

This opinion will be published on EUR-Lex.  

Done at Frankfurt am Main, 4 March 2022. 

[signed] 

The President of the ECB 

Christine LAGARDE 

14   

See paragraph 2.3 of Opinion CON/2017/11 and paragraph 2.4 of Opinion CON/2020/1. 

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