FSC warns against risky behavior in current low interest rate environment

The Financial Stability Committee (FSC) points to vulnerabilities in financial markets due to the search for yield in a report dated October 08, 2021. It says the tensions are also evident in the Dutch real estate market, where buyers are increasingly using up their full borrowing capacity and, for the first time since 2013, the production of partially amortizing mortgages is on the rise. House prices in the Netherlands continued to rise sharply last year. DNB has therefore taken the final decision to introduce a lower limit for the risk weighting of mortgage portfolios as of January 1, 2022, requiring banks to hold a certain minimum amount of capital in relation to their mortgage exposures. In addition, the Committee believes it is important to restore regular fiscal discipline. Finally, the FSC discussed liquidity risks in pension funds and cyber risks.

The report can be accessed here.