Press release 27 June 2017

Macroprudential decision: A minimum risk weight level of 15% on mortgage loans, no changes to the loan cap, no countercyclical capital buffer requirement

The Board of the Financial Supervisory Authority (FIN-FSA) has set a minimum risk weight level of 15% for residential mortgage loans applicable to credit institutions that have adopted the Internal Ratings Based Approach for the calculation of capital requirements. The decision on the 15% minimum risk weight will enter into force as from 1 January 2018, in accordance with the plan announced earlier, and will be valid for two years. The entry into force of the decision is subject to the EU Council not objecting to the decision. 

The Board did not apply any other macroprudential tools. The loan cap remains unchanged, i.e. the maximum loan-to-value ratio will remain at 90% (for a first home purchase at 95%) and the collateral security requirements will remain unchanged. The countercyclical capital buffer requirement (variable capital add-on) applicable to banks will remain at 0.0%.

'Higher risk weights are aimed at strengthening the resilience of the financial system', says Dr Olli Rehn, Chairman of the Board of the FIN-FSA. 'Although growth in indebtedness has faded, household indebtedness is still at a high level.'

The size of the risk weight determines the amount of own funds that a credit institution must hold on its balance sheet to hedge against credit losses from residential mortgages. The minimum risk weight applies to the average risk weight on residential mortgages from credit institutions, and it is set under Article 458 of the Capital Requirements Regulation. Upon proposal by the European Commission and opinions issued by the European Systemic Risk Board (ESRB) and the European Banking Authority (EBA), the EU Council may reject a measure proposed by a Member State.

The credit-to-GDP gap, used as the primary indicator for setting a countercyclical capital buffer requirement, continues to give a reference value of 0.0% for the countercyclical capital buffer requirement. The credit-to-GDP gap has shown a downward trend since 2010, and the latest observation is the smallest since 2003. In addition, the supplementary risk indicators used in preparation of the assessment are not signalling such an increase in financial system cyclical vulnerabilities as would necessitate a higher countercyclical capital buffer requirement. Nor are key indicators pointing to an immediate need to tighten the conditions for the maximum loan-to-value ratio.

The Board of the FIN-FSA made its decision upon a proposal by the Director General of the FIN-FSA and after consultation with the Bank of Finland, the Ministry of Finance and the Ministry of Social Affairs and Health. In accordance with the regulations governing the Single Supervisory Mechanism, the European Central Bank was also consulted in respect of the decision.

For further information, please contact

  • Peik Granlund, Financial Analyst, tel. +358 9 183 5236.


The Bank of Finland and the Financial Supervisory Authority today published an assessment of the domestic macroprudential situation (Macroprudential Report 1/2017, in Finnish only), which will support decision-making. The report is published bi-annually. 

See also