Macroprudential decision concerning countercyclical capital buffer and maximum loan-to-collateral ratio: FIN-FSA does not impose a countercyclical capital buffer requirement on credit institutions and keeps housing loan cap unchanged
The Board of the Financial Supervisory Authority (FIN-FSA) has decided not to impose a countercyclical capital buffer (CCyB) requirement on credit institutions, and therefore the CCyB rate will remain at zero. In addition, the Board decided to keep the maximum loan-to-collateral (LTC) ratio, or loan cap, for residential mortgage loans other than first-home loans unchanged at 85%. These decisions are reviewed on a quarterly basis. The credit-to-GDP gap, used as the primary indicator for setting a CCyB requirement, continues to give a reference value of 0% for the CCyB requirement. Despite some signals of higher risks, indicators of credit growth and growth in financial market risk appetite as well as other supplementary risk indicators, such as overall economic developments and housing price developments, are not, overall, signalling such a build-up of financial system risks as would necessitate an immediate rise in the CCyB requirement. Assessments of the need to tighten the CCyB requirement have also taken other macroprudential policy measures, such as the possible imposition of a systemic risk buffer, into consideration.
On 19 March 2018, the FIN-FSA Board decided to lower the maximum LTC ratio for residential mortgage loans other than first-home loans by 5 percentage points. Hence, the maximum LTC ratio for residential mortgage loans restricts the amount of a residential mortgage to 85% at most (in the case of a first home purchase, to 95% at most) of the current value of collateral posted at loan approval. According to the updated risk assessment, mortgage lending and household indebtedness-related risk factors considered in taking macroprudential policy decisions have remained unchanged from the previous quarter. Therefore, it is justified that the decision of a lower maximum LTC ratio remain in force.
The FIN-FSA today also published a decision on the systemic risk buffer requirement for credit institutions. See the press release 18/2018*.
For further information, please contact
- Marja Nykänen, Chairman of the Board of the Financial Supervisory Authority, tel. +358 9 183 2007
- Board's macroprudential decision (pdf)
- Macroprudential decision proposal by the Director General of the FIN-FSA circulated for comments (pdf, in Finnish)
- Opinions on the macroprudential decision (in Finnish):
- What does the stability of the financial system mean?
- Macroprudential instruments
- Decision making
*) Link added on 2 July 2018.