Regulatory Alerts2011-09-21
Added · Updated
Recommendation of the European Systemic Risk Board on lending in foreign currencies
National supervisory authorities are recommended to require financial institutions to provide borrowers with adequate information on foreign currency lending risks, restrict loans to creditworthy borrowers, and implement stricter underwriting standards such as debt service-to-income and loan-to-value ratios. Authorities must also ensure institutions incorporate foreign currency risks into internal risk management and hold adequate capital under the Second Pillar of the Basel II framework, while closely monitoring and potentially limiting funding and liquidity mismatches. Home state supervisors are required to impose measures on cross-border operations that are at least as stringent as those in the host Member State. Addressees must report actions or justify inaction to the ESRB and Council by 31 December 2012, with specific follow-up deadlines for the European Banking Authority extending to 2013.