Dijsselbloem Joins Banks in Playing Down Mortgage Risks to ECB

Dutch Finance Minister Jeroen Dijsselbloem is willing to help lenders in his country explain to the European Central Bank why mortgage loans, accounting for about a third of their balance sheets, are less risky then they may seem.

“I am definitely monitoring it,” Dijsselbloem, who also leads meetings of euro-area finance ministers, told reporters in Luxembourg today. “It’s not the case that the ECB is punishing our banks for it now, yet banks are making an effort to explain and show the risks, and that seems wise to me.”

As the ECB is scrutinizing home loans as part of a euro area-wide bank review before assuming oversight on Nov. 4, the Dutch banking association NVB will visit European regulators to clarify the paradox between debt levels that are among the highest and defaults and losses that are among the lowest in the region. Institutional factors such as tax rules, lender protection and social security play a role, according to the industry group.

“If you don’t explain it properly, you run the risk of mistaxations,” Edward Feitsma, head of supervision and financial markets at Amsterdam-based NVB, said in an interview on June 18. “It would be a shame if based on wrong risk assumptions, wrong risk weights would be set.”

Dijsselbloem said that if needed, he could also play a role in clarifying why risks on Dutch mortgages are limited.

“In the Netherlands, mortgages are paid very diligently, so risks in this portfolio are much lower than in other countries where people may be less disciplined in paying monthly mortgage costs,” he said.

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