Financial Stability Committee discusses mortgage market and future macroprudential policy

At its meeting on 20 May 2014, the Financial Stability Committee discussed the preconditions for a long-term stable mortgage market and the role played by standards for mortgage finance in this context. Further analysis is needed to determine and assess the housing and mortgage market risks as well as the costs and benefits of any changes to these standards.

Preconditions for a stable mortgage market

The Dutch government’s recent measures, such as mandatory annuity-based amortization of mortgages, make an important contribution to a more stable mortgage market. The committee discussed the risks facing the housing and mortgage market, and the role of standards for mortgage finance. The need for additional measures must be assessed in a broad economic context. Any assessment has to consider factors such as access of first-time buyers to the market for owner-occupied homes, the functioning of the rental market and the impact on households' savings and capital accumulation. Further analysis is needed to map out and assess the risks in the housing and mortgage market as well as the costs and benefits of any additional measures. The committee will continue its discussions about this topic at its next meeting.

Harmonised minimum standard for loss absorption capacity of banks in resolution

Policies are being developed internationally to allocate losses to the shareholders and creditors of failing banks (bail-in). EU Member States must have implemented the bail-in instrument by 1 January 2016. The committee subscribes to the Dutch efforts to develop an internationally harmonised minimum standard for the loss absorption capacity of banks in resolution. This will ensure that the bail-in instrument can be applied in an effective and credible manner.

Other topics

The committee also exchanged views about the risks to financial stability in the Netherlands and specifically discussed the position of the Dutch life insurance sector and the changes needed in this sector. In addition, the committee finds that most Dutch major banks have improved the risk disclosures in their annual reports, as recommended by the committee earlier. These disclosures enable investors to make better risk assessments.

The Financial Stability Committee

The fourth meeting of the Financial Stability Committee was held on 20 May 2014. In this committee, representatives of De Nederlandsche Bank (DNB), the Netherlands Authority for the Financial Markets (AFM) and the Dutch Ministry of Finance meet twice a year to discuss developments relating to the stability of the Dutch financial system, under the chairmanship of the President of DNB. The Netherlands Bureau for Economic Policy Analysis (CPB) takes part in the meetings as an external expert.

A full account of the Financial Stability Committee's fourth meeting can be found here. For questions, please contact DNB spokesman Ben Feiertag at telephone number +31 6 524 961 42.