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%).
