The European Systemic Risk Board (ESRB) has issued recommendations on the subject of granting loans in foreign currencies to consumers. The FSMA has published a document that details the content of these recommendations.
The ESRB is the institution responsible for the macro-prudential oversight of the financial system within the European Union. The FSMA and the NBB are the Belgium members of the ESRB, chaired by the president of the European Central Bank. Its main objective is the prevention or mitigation of systemic risks that could have an adverse effect on financial stability within the European Union. To this end, part of the ESRB's role is to issue recommendations that describe the remedial action to be taken in response to the risks identified.
The ESRB has detected an increase in loans granted in foreign currencies in a number of Member States of the European Union. The ESRB considers that this increase in foreign currency lending could represent a significant systemic risk for those Member States and has therefore issued several recommendations on the subject. Recommendation A, which falls within the competences of the FSMA, provides that registered companies that grant loans in foreign currencies must inform their clients of the risks stemming from developments in the foreign exchange and interest rates. Registered companies are also encouraged to offer customers domestic currency loans, as well as financial instruments to hedge against foreign exchange risk.
The FSMA is of the opinion that these recommendations provide useful clarifications concerning the information requirements incumbent on registered companies when granting loans. Where such an activity in foreign currencies is undertaken by a mortgage company, the FSMA will take into account these recommendations when carrying out its supervisory tasks.