Regulatory Alerts2019-06-27
Added · Updated
Warning of the European Systemic Risk Board on medium-term vulnerabilities in the residential real estate sector in the Czech Republic
The European Systemic Risk Board identifies medium-term vulnerabilities in the Czech residential real estate sector, specifically high house price overvaluation of 10-15%, rapid housing loan growth, and loose lending standards, as sources of systemic risk to financial stability. The Board notes that current borrower-based macroprudential measures are not legally binding and recommends that Czech authorities establish a legal framework to implement legally binding limits on loan-to-value, debt-to-income, and debt-service-to-income ratios. This recommendation aims to ensure all credit providers comply with measures to mitigate risks from potential adverse economic conditions or interest rate increases.
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