Finance minister Alexander De Croo has asked the National Bank (NBB) to take measures to rein in the number of imprudent mortgages agreed by retail banks. In its latest annual report, the NBB expressed concern at the bank’s willingness to grant mortgages to borrowers without exercising due diligence. Banks offer interest rates at too low a level, the NBB said, and continue to lend more than 80% of the value of a property.
“The message to the banks is clear: you need to pay attention,” said NBB governor Pierre Wunsch (photo). “We are not happy with what has been happening. The banks claim there is a great deal of competition on the Belgian market, which prevents them from raising their margins. If this continues, we will take action.”
Presenting the report, Wunsch said, “We are not seeing any major imbalances in our financial sector, but there are a number of weak spots” – one of which is the low margins earned by the banks from low mortgage interest rates. “A stock of loans with too-low margins is a serious handicap for the banks. I don’t want to exaggerate, but Dexia was a bank with a large capital buffer but very low margins. We have to be careful we are not quietly preparing the next financial crisis.”
Dexia collapsed in 2012, with its assets bought by the Belgian state for four billion euros. Its main activities are now run by Belfius.
Now finance minister De Croo has asked the NBB to do just that: “To play its part as regulator and take measures, together with the banks, to ensure people are not driven into financial difficulties.” As experience in the United States has shown, over-lending to people with low credit leads to defaults in repayments and foreclosures. Families lose their homes and are left with continuing debts, as the resale value of their property is not enough to cover what they owe.
According to De Croo, the banks themselves have expressed a wish, through their sector federation Febelfin, for the NBB to take action.
Meanwhile Kris Peeters, minister for the economy and consumer protection, suported the call for restrictive measures by the NBB, as long as it did not jeopardise the position of young people wishing to take their first steps on the property ladder.