Brussels, 2 December 2008
Mortgage markets: Commission study shows varying national approach to regulation of 'non-credit' institutions
The European Commission has published a study on the activities, regulation and supervision of mortgage lenders that are not registered as 'credit institutions' under domestic law. It shows that in the majority of Member States, lenders operating outside the EU legal framework for credit institutions are regulated and supervised by national authorities, and that their national market share is small compared with that of fully-fledged credit institutions. The study will contribute to the Commission's assessment of whether further action in this area is needed at EU level. It is a follow-up to the December 2007 White Paper on the Integration of EU Mortgage Credit Markets (IP/07/1955). Stakeholders are invited to comment on the study by 28 February 2009.
Internal Market and Services Commissioner Charlie McCreevy said: "This study is of great significance in the current financial context. It will help the Commission to assess whether there are any regulatory gaps in the supervision of EU mortgage lenders, and whether new measures are needed to address them".
The study is particularly relevant in the context of the current financial turmoil. Indeed, in the United States, mortgage market participants with no federal supervision are reported to having been responsible for the origination of more than 50% of sub-prime mortgages.
About non-credit institutions
In some Member States, such as France or Austria, lenders cannot operate without a banking licence. In other Member States, such as the UK or the Netherlands, they are allowed to grant loans as long as they do not receive deposits from the public. Depending on the Member State where they operate, companies allowed to lend without being licensed as 'credit institutions' fall within different categories. They can be insurance companies, which can grant mortgage loans in 14 countries, subsidiaries of credit institutions, or other companies such as financial institutions.
Conclusions of the study
The study found that 20 Member States allow domestic and foreign non-credit institutions to provide residential mortgage loans. Of these 20 Member States, 14 require that non-credit institutions undertake some form of notification, registration or authorisation in order to provide residential mortgage loans. Six Member States do not however require any notification, registration or authorisation. In principle, general conduct of business rules, including consumer protection laws, apply in all Member States.
The study also revealed that the market share of non-credit institutions in the Member States’ national mortgage markets is small compared with the market share of fully-fledged credit institutions. Non-credit institutions in the UK have the highest market share (12%), followed by the Netherlands (10%) and Romania (9.7%). Of the six Member States that do not require any notification, registration or authorisation, Finland is the only country where non-credit institutions enjoy a noteworthy share of the lending market (7%).
The study will contribute to the Commission's assessment of whether action is needed at the EU level.
The Commission welcomes any comment on this study and on the issue that it covers by 28 February 2009. Responses should be sent to:
Responses will be placed on the Commission's website unless explicitly indicated otherwise.
The study is available at: