ECB- CONFIDENTIAL

Follow-up to the Recommendation ESRB/2019/7 on
medium-term vulnerabilities in the residential real estate
sector in the Netherlands
Sub-recommendation B(1) and Recommendation C
Reporting deadline: 31 October 2021
Addressees:

The Netherlands
The macroprudential authority, the designated authority or the
competent authority in the Netherlands, as applicable

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Introduction

Legal instrument

Recommendation ESRB/2019/7 on mediumterm vulnerabilities in the residential real estate
sector in the Netherlands

Reporting institution

De Nederlandsche Bank

Date of reporting

31 October 2021

Confidentiality regime*

Name and contact details of the respondent

Name: Francesco Caloia
Email: f.g.caloia@dnb.nl
Tel: +31 631028530

* Please indicate the level of confidentiality you wish to apply to the responses provided herein.

Timeline for completing the template and submitting the follow-up report
The purpose of this template is to assist the addressees to provide the ESRB with a follow-up report on
the assessment of implementation of sub-recommendation B(1) and Recommendation C of the
Recommendation ESRB/2019/7 (hereinafter the ‘Recommendation’), due by 31 October 2021.
Addressees are kindly invited to complete this template, summarising the actions taken to comply with
the Recommendation or providing adequate justification for inaction until 31 October 2021.
Addressees are expected to provide relevant information and documentation related to the
implementation of Recommendation including information on the substance (such as on the legal form
of the measure) and timing of the actions taken. If an addressee only partially complies, it should provide
a full explanation of the extent of non-compliance, as well as other details of partial compliance. The
explanation should clearly specify the relevant parts of the recommendation which the addressees do
not comply with.
Instructions to addressees
Each addressee should submit the completed template to the ESRB via the ESRB Secretariat.
Subsequently, the ESRB Secretariat will arrange for the transmission of the reports to the Commission,
the Council and the European Parliament in accordance with Article 17(1) of Regulation No 1092/20101.
For the purposes of reporting to the ESRB, the completed template should be sent to the ESRB
Secretariat electronically via DARWIN or ASTRA in the dedicated folder or by email to
ESRBlegal@ecb.europa.eu by 31 October 2021:
https://darwin.escb.eu/livelink/livelink/app/nodes/346348883
ASTRA:
https://astra.ecb.europa.eu/app/#/files?1887614256380123477

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OJ L 331, 15.12.2010, p. 1
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Sub-recommendation B(1)
Tightening of borrower-based measures and approach to calibration
It is recommended that the Netherlands lower the current legally binding limit that applies to the LTV ratio, thus
ensuring that collateral for new mortgage loans is sufficient to cover credit losses corresponding to the potential
decrease in house prices under adverse economic or financial conditions.

Content of subrecommendation

Addressee

The Netherlands

Reporting deadline

31 October 2021
Sub-recommendation B(1)

1.

Actions taken

Please describe the essence of the
actions taken to comply with the
relevant sub-recommendation,
including how it ensures that
collateral for new mortgage loans is
sufficient to cover credit losses
corresponding to the potential
decrease in house prices under
adverse economic or financial
conditions.

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2.

Timeline

Please indicate the time period
when the actions required under the
relevant sub-recommendation were
taken.

Compliance Criteria

Sub-recommendation B(1)

1. Compliance criterion
Please describe how you applied
the principle of proportionality,
taking into account the objective
and content of this
recommendation.
[Article 1(a) of Section 2.2 of the
Recommendation]

2. Compliance criterion
Please provide evidence on the
assessment you made of the
position of the Netherlands in the
economic and financial cycles prior
to further lowering the existing
limits that apply to the LTV ratio.
[Par. 1 and 2 of Recommendation
B, Annex I]

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3. Compliance criterion
Please describe how the calibration
and phasing-in of the measure
lowering the existing limit that
applies to the LTV ratio took into
account the position of the
Netherlands in the economic and
financial cycles.
[Article 1(b) of Section 2(2) of the
Recommendation]

4. Compliance criterion
Please include the assessment of
the vulnerabilities related to
pockets of overvaluation of house
prices and the collateralisation of
new and existing mortgage loans,
including the distribution of new
mortgage loans according to their
LTV ratios, with the relevant ratios
being calculated in accordance
with Annex IV to Recommendation
ESRB/2016/14 of the European
Systemic Risk Board2, together
with the functioning of the actions
undertaken, having regard to the
objectives of this
Recommendation.

2

Recommendation ESRB/2016/14 of the European Systemic Risk Board of 31 October 2016 on closing real estate data gaps (OJ C 31, 31.1.2017, p. 1).

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[Article 2(b), Section 2(2) of the
Recommendation]

Self-assessment
In case of action, please provide a
self-assessment on whether the
actions undertaken are fully
compliant, largely compliant,
partially compliant, materially noncompliant or non-compliant with the
above sub-recommendation.

Justifications
Please provide, as appropriate,
justifications for (i) inaction, (ii)
delays in action and (iii) departure
from the sub-recommendation, as
may be relevant. Please provide a
self-assessment on whether the
inaction is sufficiently or
insufficiently explained.

Additional information
Please provide other information
that is not otherwise covered in the
present document and that is
relevant for the purposes of the
follow-up assessment.
Please also attach any relevant
documents (if applicable).

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Recommendation C
Activation of capital-based measures
It is recommended that the macroprudential authority, the designated authority or the competent authority in the
Netherlands, as applicable, ensure, by activating capital-based measures, the resilience of credit institutions authorised in

Content of recommendation

the Netherlands in the face of the potential materialisation of systemic risk related to residential real estate which could
lead to direct and indirect credit losses stemming from mortgage loans or arising as a consequence of the decrease in
consumption by households with housing loans.

Addressees

The macroprudential authority, the designated authority or the competent authority in the Netherlands,
as applicable.

Reporting deadline

31 October 2021
Recommendation C

1. Actions taken
Please describe the essence of the
actions taken to comply with the relevant
recommendation, including how the
measure taken ensures the resilience in
the face of the potential materialisation of
systemic risk.

2. Timeline
Please indicate the time period when the
actions required under the relevant
recommendation were taken.

On 21 June 2021, DNB announced the intention not to further postpone the introduction of a risk-weighting floor for
residential mortgages (starting from January 2022). On October 21 2021, the introduction of the measure was published in
the Staatscourant (Government gazette). In line with the announcement, the regulation will effectively come into force as of
January 1 2022.
By increasing the loss-absorbing capacity of banks (via a higher capital requirements on residential mortgage exposures)
the measure taken ensures that banks increase their resilience in face of a potential materialization of systemic risks
stemming from the housing sector.
On 15 October 2019, DNB announced its intention to impose a floor for the risk weights of IRB banks’ mortgage portfolios,
based on art 458 of the CRR. Following a public consultation and the notification of the relevant European institutions,
DNB intended to take a final decision in March 2020, and the measure was due to take effect in Fall 2020. On 6 March
2020, DNB received notification from the European Commission of its decision not to object to the proposed measure.
On 17 March 2020, DNB decided to postpone the introduction of the measure in light of the coronavirus outbreak and its
potential impact on the Dutch economy and the financial sector. In October 2020, DNB has announced that the measure
will not come into force before the end of 2021.

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On 21 June 2021, DNB decided not to further postpone its introduction, and announced that the measure will come into
force as of January 2022. On October 21 2021, the introduction of the measure was published in the Staatscourant
(Government gazette). The regulation will effectively come into force as of January 1 2022.

Compliance Criteria

Recommendation C

1. Compliance criterion
Please describe how you applied the
principle of proportionality, taking into
account the objective and content of this
recommendation.

DNB considers the measure to be proportionate: the objective to increase banks’ resilience against a potential downturn in
the housing market is achieved by imposing an average minimum risk weight for IRB banks, which increases and stabilizes
the amount of capital held against residential mortgage exposures. The total amount of capital banks need to hold is estimated
to increase by around EUR 5 billion.

[Article 1(a) of Section 2.2 of the
Recommendation]

2. Compliance criterion
Please provide evidence of the
assessment you took prior to activating
capital-based measures about the
position of the Netherlands in the
economic and financial cycles.

The decision to postpone the introduction of Article 458 measure (taken in March 2020) reflected the possible
materialization of systemic risks after the coronavirus outbreak and its potential impact on the Dutch economy and financial
sector. The subsequent decision not to further postpone the introduction of Article 458 measure (taken in June 2021)
reflected the strongly positive economic outlook projected for Dutch economy in the period 2021q2-2023, as evident
from DNB’s economic projections published shortly later.

[Par. 1 of the Recommendation C, Annex
I]

3. Compliance criterion
Please describe how the calibration and
phasing-in of the capital-based

The calibration of the measure assigns a 12% risk weight to the portion of the loan not exceeding 55% of the market value
of the immovable property collateral, and a 45% risk weight is assigned to the remaining portion of the loan. The risk weight
floor for the mortgage portfolio is than calculated as the exposure-weighted average of the assigned risk weights for the
individual loans. This means that the risk weights of the individual loans to be used for this calculation increase with the LTV

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measures took into account the position
of the Netherlands in the economic and
financial cycles.
[Article 1(c) of Section 2(2) of the
Recommendation]

ratio: risk weights range from 12% for loans with an LTV ratio below or equal to 55%, to 26.85% for loans with an LTV ratio
of 100%, and above for loans with LTV ratios above 100. (see the figure below).
The phase-in and calibration of the measure considered the position of the Netherlands in the business and credit cycle (see
previous response to compliance criteria 2).

4. Compliance criterion
In case the adopted capital-based
measures were further tightened or
additional macroprudential measures
were needed to address the
vulnerabilities identified in the
Netherlands, please provide a
description on how the relevant decision
took into account the characteristics of
the capital-based measures already
activated, the initial calibration of those

Not applicable

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measures and the results of the
assessment of vulnerabilities.
[Par. 2 of the Recommendation C, Annex
I]

5. Compliance criterion
Please include the assessment of the
vulnerabilities related to pockets of
overvaluation of house prices and the
collateralisation of new and existing
mortgage loans, including the distribution
of new mortgage loans according to their
LTV ratios, with the relevant ratios being
calculated in accordance with Annex IV
to Recommendation ESRB/2016/14 of
the European Systemic Risk Board3,
together with the functioning of the
actions undertaken, having regard to the
objectives of this Recommendation.

House prices have gone up by almost 8% annually on average in the past three years. While sluggish supply and declining
interest rates partly account for the price increases, there are also signs of overvaluation as evident from high and
increasing price-to-income ratios in the housing market. These are now higher than they were at the peak of the previous
crisis in 2008. While this is leading to decreasing affordability and pockets of risky lending, as evident from the increasing
share of newly grant mortgages with high loan-to-income ratios and the revived uptake of interest only mortgages, the
share of newly originated mortgages with high LTV ratios is decreasing (right figure below), despite remaining very high in
general, as regards both the new production and the stock of exposures (left figure below).

[Article 2(b), Section 2(2) of the
Recommendation]

3

Recommendation ESRB/2016/14 of the European Systemic Risk Board of 31 October 2016 on closing real estate data gaps (OJ C 31, 31.1.2017, p. 1).

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Self-assessment
In case of action, please provide a selfassessment on whether the actions
undertaken are fully compliant, largely
compliant, partially compliant, materially
non-compliant or non-compliant with
Recommendation C.

In our opinion, the actions taken are fully compliant with the recommendation received and fully proportional to the
assessed level of risk.

Justifications
Please provide, as appropriate,
justifications for (i) inaction, (ii) delays in
action, or (iii) departure from
Recommendation C, as may be relevant.
Please provide a self-assessment on
whether the inaction is sufficiently or
insufficiently explained.

Not applicable.

Additional information
Please provide other information that is
not otherwise covered in the present
document and that is relevant for the
purposes of the follow-up assessment.

Additional information can be found in:
- Notification by De Nederlandsche Bank on a stricter measure based on Article 458 of the CRR (europa.eu)
- Overzicht Financiele Stabiliteit - Najaar 2021 ENG (dnb.nl)

Please also attach any relevant
documents (if applicable).

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