On 18 February 2011, the Netherlands Authority for the Financial Markets (AFM) imposed three administrative fines totalling 130,000 euros on ING BANK N.V. (ING Bank) for using an acceptance policy for the provision of mortgage loans that was insufficiently aimed at preventing excessive credit provision, and with insufficient assessment of whether entering into a credit agreement was responsible for the consumer, with a view to preventing excessive credit provision. ING Bank has thus granted loans that were irresponsible.
Violation of Article 115 of the Decree on the Supervision of the Conduct of Financial Enterprises (BGfo)
The administrative fine was imposed because ING Bank has established criteria for the basis of the assessment of credit applications from its consumers and it has also applied these criteria, whereas in the opinion of the AFM, these criteria are not sufficiently focused on preventing excessive credit provision.
ING Bank used a policy that, under certain conditions, allowed a deviation from the standard of the Code of Conduct for Mortgage Financing (GHF standard) for applicants for mortgage loans if the parents had co-signed for joint and several liability. ING Bank's policy did not provide an adequate assessment of the financial position of the parents. The policy also stipulated that mortgage loans could be provided, in deviation from the GHF standard, with the credit being assessed on the basis of the consumer’s historical housing costs and no account needed to be taken of BKR registered loans up to € 5,000 in the assessment of the consumer’s financial position.
In addition, ING Bank used a policy for credit provision to self-employed people for whom, on the basis of a ‘rating’ based on components that could not be clearly established, in some cases a mortgage could be granted on the basis of one income tax return and/or one annual report. As a result of this, the AFM is unable to assess whether in all cases, under the policy of ING, mortgage loans were granted that were responsible for the consumer.
In the opinion of the AFM, ING Bank has thus violated Article 115:1 of the Decree on the Supervision of the Conduct of Financial Enterprises (BGfo). This article requires a credit provider to establish criteria oh which he bases his assessment of a credit application from a consumer to prevent excessive credit provision, and to apply these criteria in assessing a credit application. The acceptance policy of a credit provider must be aimed at preventing excessive credit provision to consumers.
The AFM also notes that ING Bank has reported to the AFM that it amended its credit acceptance policy on the abovementioned aspects in 2010.
Violation of Article 4:34 (1 and 2) of the Financial Supervision Act (Wft)
The AFM has reviewed credits granted by ING Bank during the period from 15 June to August 1 2009. This review showed that, in 5 of the 20 explanation files examined, ING Bank did not make sufficient use of the information it obtained in its assessment for the provision of a mortgage loan, with a view to preventing excessive credit provision to consumers. In these five cases, ING Bank granted mortgage loans to consumers that were irresponsible. In the opinion of the AFM, ING Bank thus violated Article 4:34 (1 and 2) of the Financial Supervision Act (Wft).
Article 4:34 (1 and 2) of the Wft requires a credit provider to seek information about the consumer’s financial position and to assess whether entering into the agreement is responsible, in order to prevent excessive credit provision in the interest of consumers. If, with a view to preventing excessive credit provision, entering into the credit agreement is irresponsible, the provider should not enter into any credit agreement.
The AFM considers, in the case of mortgage loans, that the Code of Conduct for Mortgage Financing (GHF) of the Forum for Mortgage Financiers is in principle a solid supplement to the standards in the Financial Supervision Act against excessive credit provision. ING Bank has stated that it endorses the GHF. In the five cases in which the AFM has detected a violation, ING Bank granted mortgage loans to consumers with a higher credit than the maximum allowable according to the GHF Code. In its files, ING Bank has insufficient data to support why the loan extended was indeed appropriate for the consumers concerned. For this reason, the AFM believes that the provisions of Article 4:34 (1 and 2) of the Financial Supervision Act (Wft) were violated in the five cases.
The administrative fines for ING Bank ensue from a broader survey of mortgage lending by major banks in the Netherlands. The survey followed a period in which the major banks were given the opportunity to implement the recommendations in their policies from the AFM report 'Quality recommendation and transparency in mortgages' of 1 November 2007. This was a survey into the recommendation and provision of loans during the period from January to September 2009, in which the largest providers were assessed on how they deal with the rules surrounding the recommendation of risk insurance, transferring a mortgage, and the granting of loans for owner-occupied property. This survey has now been completed.
Recommendations should fit the specific situation of the customer. The amount of the mortgage must also be in the right proportion to the customer’s income. A bank should therefore have a policy aimed at preventing excessive credit provision. The standards from the GHF were the starting point for this. The survey has led to the imposition of enforcement measures. The institutions involved in the survey have already had the deficiencies in their recommendation and provision of mortgages pointed out to them. This has led to adjustments, including some in the policy, which reduce the risk of error in the providing and recommending of mortgages. In the interest of the customer during the coming period, the AFM will continue to monitor these institutions to see whether the quality in the provision and recommendation of mortgage has been permanently improved.
The administrative fines for violations by ING Bank were imposed on the basis of the Decree on Penalties under the Wft. This decree applies to violations that occurred or commenced prior to 1 August 2009. The amount of the administrative fine for violations is fixed in the Decree on Penalties under the Wft. In the case of ING Bank, being in violation of Article 115 of the BGfo leads to a penalty amount of € 120,000, and in violation of Article 4:34 (1 and 2) of the Wft to an amount of € 5,000 for each violation.
Interested parties can submit the decision to impose an administrative fine by the AFM to a court for a review.
If you have any questions or complaints, you can contact the AFM's Financial Markets Information Line at: 0900 5400 540 (0.05 euros per minute).
The AFM promotes fairness and transparency within financial markets. We are the independent supervisory authority for the savings, lending, investment and insurance markets. The AFM promotes the conscientious provision of financial services to consumers and supervises the honest and efficient operation of the capital markets. Our aim is to improve consumers’ and the business sector’s confidence in the financial markets, both in the Netherlands and abroad. In performing this task the AFM contributes to the prosperity and economic reputation of the Netherlands.
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