Brendan Burgess
Founder
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I would have thought that this comment is totally irrelevant in the context of the new rules which are loan specific rather than portfolio limitations.but said that, across the bank’s mortgage portfolio, the average LTV is already below the proposed 80% limit.
I would have thought that this comment is totally irrelevant in the context of the new rules which are loan specific rather than portfolio limitations.
In France mortgage lending is controlled using a formula that also takes into account repayment on other debts and generally involves low loan-to-value ratios. This tough approach may well have influenced the senior Irish banking regulator, Frenchman Cyril Roux, who previously worked with Nouy in the Bank of France.
What does Nouy think?
“I strongly welcome such measures. They have been in place in France for some time and they have been very effective. They have a real impact on stopping asset bubbles in their tracks. So I think those are good measures,” she said.
Criticisms of the new rules are understandable, she says, as they can have a disproportionate impact on those who cannot get cash to fund the deposit to buy a new house.
“However, on balance, I believe that the most important thing is to avoid destabilising the banking system . . . In my view it is irresponsible to give loans to people who possibly will not be able to repay them. It is so much worse for people to find that they cannot afford their commitments than to be declined credit because they do not fall within the loan-to-income or loan-to-value caps.”
Asked specifically about the proposed requirement that most borrowers have deposit of a 20 per cent, she said: “Maybe I am not the right person to ask the question because in my country this is the case and I have always known that to be the case. It does no good for people to be placed in a situation where they cannot meet their commitments. This is something which has been shown by the subprime crisis.”
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