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European Systemic Risk Board
Sonnemannstrasse 22
60314 Frankfurt
Germany

Directie Financiële
Markten
Korte Voorhout 7
2511 CW Den Haag
Postbus 20201
2500 EE Den Haag
www.rijksoverheid.nl

Ons kenmerk
2019-0000139373
Uw brief (kenmerk)

Datum
Betreft

24 september 2019
ESRB recommendation 2019/7

Dear Mr. Draghi,
The ESRB is publishing a recommendation on medium-term vulnerabilities in the
residential real estate sector in the Netherlands (Recommendation ESRB/2019/7).
The Dutch government welcomes the recommendations and supports the work by
the ESRB to monitor systemic risks to financial stability in the European financial
sector.
The recommendations are partly addressed to the Dutch government and partly
to the Dutch Central Bank (DNB). The ESRB recommends that (a) the
Netherlands ensures that the recommendation powers of the Dutch Financial
Stability Committee (FSC) are complemented by an “act or explain” mechanism
or that an accountability mechanism is established in order to make public the
views of the authority responsible for the application of borrower-based measures
following a recommendation issued by the FSC. In 2014 and 2017 the ESRB1, the
Financial Stability Board (FSB)2 and the International Monetary Fund (IMF)3 have
recommended the Dutch government to – in short – embed the FSC in primary
legislation and strengthen accountability for FSC recommendations via the
establishment of a formal “act or explain” mechanism. In line with these
recommendations, the Dutch government is currently preparing legislation that
will give the FSC a legal basis in primary law and power to make
recommendations. The new legislation will also put in place a mechanism of
accountability through transparency. As the Dutch government (the Minister of
Finance in collaboration with the Minister of Interior and Kingdom Relations) is
the authority which is responsible for the application of borrower-based
measures, this mechanism holds that authority publically accountable regarding
recommendations made by the FSC. It ensures that the views of this authority
regarding FSC recommendation are made public.

1

European Systemic Risk Board, “ESRB Recommendation on the macro-prudential mandate of national
authorities (ESRB/2011/3); Follow-up Report – Overall assessment”, June 2014.
2
Peer Review of the Netherlands; Review Report, Financial Stability Board, 11 November 2014, p. 6.
3
Financial system stability assessment Kingdom of the Netherlands, International Monetary Fund, March
16, 2017, p. 18.
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Also, the ESRB recommends (b) the tightening of the existing legally binding limit
that applies to the LTV ratio and an amendment to the methodology for
determining the maximum limit that applies to the debt service-to-income (DSTI)
ratio. Since 2013 households are obliged to amortise a new mortgage loan on at
least an annuity basis within 30 years to qualify for mortgage interest
deductibility (MID). As a result, the loan-to-value of newly originated mortgage
loans decreases rapidly in the years after origination. Furthermore, the legally
binding loan-to-value limit was gradually tightened from 106% in 2012 to 100%
in 2018. The current government has decided to refrain from further tightening
the loan-to-value limit to preserve accessibility to the residential real estate
market. Moreover, last year the Dutch competent authorities and the financial
sector have started a joint effort to decrease potential risks related to nonamortising mortgage debt. It is also important to note that the default rate on
Dutch mortgage loans is very low due to, amongst others, strict personal
bankruptcy legislation and the National Mortgage Guarantee (NHG), which
significantly reduces systemic risk.

Directie Financiële
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2019-0000139373

To prevent overleveraging on household level, the loan-to-income limits were
embedded in law in 2013. The maximum percentage of gross annual income that
a household can spend on mortgage payments (interest and amortisation) is
determined yearly based on independent advice from the independent National
Institute for Family Finance Information (Nibud). Various elements of this
methodology are currently being evaluated, including the use of four-year
averages of the calculated percentages.
Recommendation (c) on the activation of capital-based measures in order to
ensure the resilience of the banking sector in relation to the medium-term
vulnerabilities identified in the Netherlands is addressed to DNB. DNB will, in
cooperation with the Dutch Minister of Finance, investigate whether the current
risk weighting of mortgages is in line with the underlying systemic risks.
Lastly, the ESRB recommends (d) broader policy action aiming to curb factors
which facilitate or promote increasing household indebtedness. The Dutch
government is aware of the cyclicality of the Dutch housing market. In close
cooperation with DNB, the Dutch government is currently exploring possible
policy measures that can limit the cyclicality of the housing market. Although the
Dutch government has no signs of pockets of credit-driven overvaluation in major
cities, the importance of increasing the housing supply is recognised. To
accelerate building plans, the Ministry of the Interior and Kingdom Relations
signed “housing agreements” with the municipalities and provinces in urban
regions with the largest housing shortages. Moreover, the Dutch government has
specific attention for the supply of rental housing. The legislative proposal
‘Measures in the middle segment rental market’ (Maatregelen Middenhuur)
contributes to the functioning of the rental market and to a specific increase in
the supply of rental housing.
Furthermore, the Dutch government recognises that, although the share of
mortgage debt to GDP has declined in recent years, it remains relatively high by
international standards. Consecutive governments have already taken several
measures to reduce mortgage debt. Besides the earlier mentioned measures, the
current government will accelerate a reduction of the maximum tax rate for the
MID as of 2020. The Dutch government is currently evaluating the tax treatment
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of owner occupied housing and mortgage debt and currently has no plans to take
further measures regarding the MID.
The Dutch government will follow-up on the actions taken in response to this
Recommendation or justify any inaction in compliance with the different timelines
mentioned by the ESRB.

Directie Financiële
Markten
Ons kenmerk
2019-0000139373

Yours sincerely,

W.B. Hoekstra

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