Banks Warned to Be More Prudent in Mortgage Loans

New Expectations for Banks and Insurance Companies

The National Bank of Belgium has set new expectations for banks and insurance companies operating in the country’s residential real estate market. The move aims to prevent a potential build-up of vulnerabilities in the market.

A Response to European Concerns

In recent years, both the European Systemic Risk Board and the European Central Bank have highlighted concerns about the Belgian real estate market. In response, the National Bank has decided to impose stricter rules on mortgage lending.

Stricter Rules for Mortgage Lending

The new expectations are designed to encourage banks and insurance companies to be more cautious when issuing mortgage loans. The key measures include:

• Increased scrutiny of loan applications
• More stringent credit checks
• Lower loan-to-value ratios
• Higher capital requirements for lenders

Collaboration with Financial Institutions

Over the next few weeks, the National Bank will work closely with banks and insurance companies to finalize the new expectations. The measure is expected to come into effect in 2020.

A Necessary Step to Protect Belgium’s Financial System

The move is seen as a necessary step to protect Belgium’s financial system against potential risks or shocks. It follows previous measures taken by the National Bank to increase capital buffers for Belgian banks to mitigate mortgage loan losses.

By imposing stricter rules on mortgage lending, the National Bank aims to maintain stability in the residential real estate market and prevent any potential build-up of vulnerabilities.