Recommendation on the management of risks associated with the provision of retail loans secured by residential property

Relaxed credit standards, fast growth in loans secured by residential property and rising property prices in an expansionary phase of the financial cycle may foster a build-up of systemic risks in the financial sector. The CNB therefore carries out regular assessments of loans secured by residential property and analyses of the situation on this market. Based on the information obtained in the course of macroprudential policy conduct and financial market supervision, the CNB issues a Recommendation on the management of risks associated with the provision of retail loans secured by residential property.

The Recommendation contains a summary of recommended limits for selected macroprudential tools and a set of other rules, the observance of which, in the CNB’s opinion, constitutes prudent behaviour under current financial conditions. The recommended limits relate mainly to the loan-to-value (LTV), debt-to-income (DTI) and debt service-to-income (DSTI) ratios. In its Recommendation1 the European Systemic Risk Board (ESRB) mentions requirements for LTV, LTI (loan-to-income, LTI), DTI and DSTI limits among the macroprudential instruments that national authorities may consider using to support financial stability on top of the instruments contained in CRD IV. These instruments are intended to prevent feedback loop between credit growth associated with excessive leverage and property price growth. For a more detail on CNB approach to the introduction of macroprudential tools targeted at risks associated with exposures secured by residential property in the Czech Republic (see the thematic article in FSR 2017/2018 (pdf, 264 kB)).

Currently applicable Recommendation

Overview of Recommendations issued

Recommendation of Date
of effect
Subject and main changes 
16 June 2015 16 June 2015 Setting of LTV limits
14 June 2016 14 June 2016 Tightening of LTV limits
 13 June 2017 13 June 2017
  • Extension of applicability to:
    • all persons authorised to provide consumer credit
    • all loans provided to clients that have a loan secured by residential property
  • Definition of risky DTI and DSTI levels
12 June 2018 12 June 2018 Setting of DTI and DSTI limits

 Links to previous Recommendations

Recommendation of the ESRB on intermediate objectives and instruments of macro-prudential policy (ESRB/2013/1).