Updates in relation to Directive 2014/17/EU on credit agreements for consumers relating to residential immovable property (the Mortgage Credit Directive or "MCD").

Revised proposal to implement the MCD in the Netherlands

On 28 September 2015 a revised proposal to amend the Netherlands Financial Supervision Act (Wet op het financieel toezicht) and the Netherlands Civil Code (Burgerlijk Wetboek) with a view to implementing the MCD was published and has been, together with the explanatory memorandum and advise of the Council of State (Raad van State), submitted for approval to the parliament. The parliamentary commission of finance stated in its advice on 20 November 2015 that, provided that all questions and comments by the parliament will be addressed by the government, the proposal may be implemented.  The Mortgage Credit Directive needs to be implemented into national law before 21 March 2016. It is not yet certain whether this timing will be feasible.

For the proposed amendments to the Netherlands Financial Supervision Act (Wet op het financieel toezicht) and the Netherlands Civil Code (Burgerlijk Wetboek) implementing the Mortgage Credit Directive and the explanatory memorandum thereto, click here and here.

Benchmark Rate

On 12 October 2015, the European Banking Authority (EBA), published a consultation paper on the benchmark rate for mortgage loans with a variable interest component with a view to Annex II to the MCD. 

Pursuant to the MCD offerors of credit need to provide customers pre-contractual information in the form of a European Standardised Information Sheet (gestandaardiseerd Europees informatieblad 'ESIS'). The ESIS, together with the instructions how to complete the ESIS, are set out in Annex II to the MCD. The ESIS provides that customers with a mortgage loan with a variable interest component should be warned that the variability of the interest could affect the actual Annual Percentage Rate of Charge (jaarlijkse kostenpercentage, 'APRC'), which warning shall be accompanied (in the ESIS) by an illustrative example on the APRC and an illustrative instalment amount, using, in certain circumstances, a benchmark rate by the EBA. In the consultation paper, the EBA sets out its proposal, a formula, for calculating the EBA benchmark rate to be used in those circumstances. The formula uses an existing external reference rate as a key input. For Eurozone Member States this would be the European Central bank Main Refinancing Rate.

The EBA invited consumers and market participants to provide their views on its proposal by 20 November 2015. It is expected that the EBA will soon publish its findings on the consultation.  

For EBA's consultation paper on benchmark rates, click here.