BDL extends use of real estate guarantees

The Central Bank (BDL) has authorized banks to continue using real estate guarantees to mitigate credit risks of non-performing loans.

The authorization has been extended for an interim period ending on December 31, 2018. The Deadline had been set in a former circular at year end 2015.

The real estate guarantees are part of the credit risk mitigation techniques that banks were allowed to use according to a BDL decision made in 2006 in compliance with the requirements of the Basel II Accord.

Banks must hedge against risks that may arise from using these techniques, and set appropriate procedures to manage them, according to the BDL 2006 decision. If these measures were not successful, BDL may require an increase in the banks’ equity capital or impose further prudential procedures.