Regulatory Alerts2021-12-02
Added · Updated
Warning of the European Systemic Risk Board on medium-term vulnerabilities in the residential real estate sector of Slovakia
The European Systemic Risk Board identifies medium-term vulnerabilities in Slovakia's residential real estate sector as a source of systemic risk to financial stability, citing increasing house price overvaluation, rapid price growth, and rising household indebtedness. The Board considers the current macroprudential policy mix appropriate but recommends fine-tuning existing borrower-based measures to address pockets of risk. It suggests that Slovak authorities might consider rebuilding the countercyclical capital buffer, introducing a sectoral systemic risk buffer, or activating the risk weight floor for internal ratings-based exposures to increase banking sector resilience. Additionally, adjustments to the favorable tax regime and improvements to the rental market functioning are recommended to mitigate structural sources of systemic risk.