Meeting of the Financial Stability Board
(© Pixabay)
Yesterday, Monday, the 43rd meeting of the Financial Market Stability Board (FMSG) was held. An notable issue was,among others,the Credit Institutions Property Financing Measures Order (KIM-V). The regulation specified rules for granting housing loans and will expire next year. In any case, the FMSG does not see any systemic risks for the banking sector when granting residential loans.
According to the FMSG, lending standards, such as debt service and loan-to-value ratios, have changed as the FMSG came into affect. Credit Institutions Property Financing Measures Ordinance (KIM-V) significantly improved. This has resulted in fewer defaulting loans than under these rules. Currently yes no major risks to financial market stability in relation to residential real estate financing.If the situation changes, the regulation could be adjusted again. But even without a fixed regulation, the FMSG expects the banks to meet the lending standards established by the KIM-VO in the future. To ensure this,the Oesterreichische National Bank (OeNB) and the financial Market Authority (FMA) should examine measures such as guidelines and capital-based measures. Additional capital buffers or an increase in risk weightings could be considered. In its release, the FMSG “expressly points out that there are still significant risks to the financial system – especially in the case of declining capital ratios together wiht a possible return to unsustainable lending standards and decoupling of the development of real estate prices from that. on income.”
The committee recommends leaving the counter-cyclical capital buffer at 0%. According to the company’s own data, the credit-GDP gap remained negative in the second quarter of 2024. In 2024, the committee began to further develop the methodology to identify cyclical risks based on analyzes from the OeNB. The new calculation logic is planned to come into effect during 2025.
“The great nuisance has been put an end to”
The furniture retailer sees the removal of the KIM regulation as a major hurdle. “It is a matter of satisfaction that on the same day that we drew attention to the dramatic situation in our industry, one of the major nuisances is now being put to an end. “The financial Market Stability Board appears to have recognized that the Credit Institutions Property Financing Measures Ordinance (KIM ordinance) is a huge obstacle to residential construction and therefore also to the furnishing industry,” he says.Hubert CastingerChairman of the furniture retail sector in the Austrian Economic Chamber (WKÖ). He is thus pleased with the decision taken by the Financial Market Stability Board this afternoon to allow the KIM Regulation to expire. “We have warned that the KIM regulation will mean the destruction of many businesses as it has led to a significant reduction in new house building. Hopefully, when the regulation expires, more people will be able to buy apartments and houses again and this will also help our industry,” said Kastinger.
The Trade and craft she also welcomes the expiry of the KIM Regulation. “this is good news for the construction industry and all the downstream areas, which have been in very arduous economic times for a long time,” says Renate Schechelbauer-Schusterchairman of the federal Trade and Crafts Division of the Austrian Chamber of Commerce (WKÖ). This will provide an incentive from 2025 onwards to overcome the tank, particularly in residential construction. “The end of the KIM regulation fulfills a demand we have been making for a long time. This removes a significant formal hurdle to building and acquiring real estate, especially single-family homes and condos,” concludes Scheichelbauer-Schuster.
What are the key implications of the expiration of the KIM-V for homebuyers and financial institutions?
Interview Between Time.news Editor and Financial Stability Expert
Time.news Editor: welcome, Dr. Fischer! Thank you for joining us today to discuss the recent outcomes of the 43rd meeting of the Financial Market Stability Board (FMSG). There were some vital discussions around the Credit Institutions Property Financing Measures Order (KIM-V). Can you start by explaining what KIM-V is and why it is indeed notable?
Dr. Fischer: Thank you for having me! The Credit Institutions Property Financing Measures Order, or KIM-V, is essentially a regulation that outlines the rules for granting housing loans. It’s significant because it helps establish the framework within which banks operate when providing financing for property purchases, ensuring that lending practices remain sound and responsible.
Time.news Editor: I see. And with the order set to expire next year, what implications does that have for borrowers and lenders alike?
Dr. Fischer: The impending expiration of KIM-V is noteworthy. It could lead to a recalibration of lending practices, as lenders may reassess their criteria for housing loans. Borrowers could face either more stringent conditions or perhaps looser criteria, depending on how regulators choose to update or replace these measures.It’s critical for all parties to stay informed on any changes that may arise.
Time.news Editor: At the meeting, the FMSG indicated that they do not foresee any systemic risks in the banking sector related to these lending practices. What does this imply about the financial health of our banking institutions?
Dr. Fischer: It’s a positive sign! The FMSG’s assessment suggests a degree of confidence in the stability of our banking institutions and their risk management capabilities. They have likely conducted thorough analyses and concluded that the current environment, coupled with the existing regulations, does not present immediate threats to the system’s stability. This reflects resilience within the banking sector.
Time.news Editor: That’s reassuring to here. Given the economic climate, do you think there are any external factors that could influence the stability of housing loans?
Dr. Fischer: Absolutely. Factors such as interest rates, inflation, and overall economic growth play significant roles.For instance, if interest rates rise, borrowing could become more expensive, which may dampen mortgage demand. Additionally, inflation affecting household incomes could create pressures on consumers, ultimately shaping the dynamics of housing finance.
Time.news Editor: Captivating points! As we look ahead, what potential changes do you foresee in property financing regulations as KIM-V approaches its expiration?
Dr. Fischer: Well, policymakers might potentially be prompted to either extend KIM-V with adjustments or introduce new frameworks that reflect current market conditions. This could include tighter controls to prevent over-lending, especially if there are signs of a housing bubble, or more supportive measures aimed at boosting homeownership through accessible financing options.
Time.news Editor: It sounds like there’s a lot to watch for in the coming months. do you have any final thoughts about how consumers should navigate the current lending environment?
Dr. fischer: Yes, I would advise consumers to stay informed.With potential changes on the horizon, borrowers should assess their financial health and stay connected with their lenders. Understanding their own financial position will be key, especially as they prepare for any shifts in the lending landscape that might arise from these upcoming regulatory changes.
time.news Editor: Thank you, Dr. Fischer, for sharing your insights today. It’s clear that both borrowers and lenders must remain vigilant as we approach these critically important regulatory deadlines.
Dr. Fischer: Thank you for having me! It’s been a pleasure discussing these critical issues.