2026 IFRS 9 benchmark for Dutch banks: interest-only mortgage overlays remain strikingly high

Strong house prices keep modelled mortgage provisions low, while interest-only overlays remain elevated. Supervisory pressure on interest-only creates a clear divide in the proportion of stage 2 loans between ECB- and DNB-supervised banks. Meanwhile, Rabobank is integrating climate risk into models. A trend that is likely to continue.

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About our benchmark

Our latest benchmark analyses the 2025 annual reports of 11 of the largest banks in the Netherlands. Together they represent more than 90% of Dutch banking-sector assets, providing a broad view of how expected credit loss (ECL) positions are evolving.

Interest-only mortgage overlays rise sharply despite a strong housing market

Total overlays increased from €741.1 million in 2024 to €800.3 million in 2025. Overlays for interest-only mortgages were again the largest category, rising from €266.1 million to €313.3 million.

The interest-only figures are particularly striking when measured against mortgage ECL excluding the interest-only overlay (primarily modelled ECL). The mean interest-only overlay percentage increased from 50.3% to 66.3%, and the median from 37.2% to 53.4%. At Rabobank, the interest-only overlay amount more than doubled from €39 million to €86 million, while its calculated overlay percentage rose from 36.4% to 124.6%. Both Rabobank and ABN AMRO reported percentages above 100%, meaning the overlay for interest-only exceeded the mortgage ECL excluding the interest-only overlay.

This is happening against a strong housing-market backdrop. Dutch house prices rose by approximately 8.5% during 2025, increasing collateral values, lowering loan-to-value ratios and supporting low modelled mortgage ECL. The overlays capture a different concern: refinancing and future affordability risk at maturity, which is not yet fully represented in historical data or existing models.

Banks begin embedding climate risk directly in IFRS 9 models

Climate-related overlays declined from €201 million to €140 million, but that should not be read as climate risk becoming less important. ABN AMRO released €43 million where previously anticipated risks regarding nitrogen did not materialise, while Rabobank reduced its climate overlay by €26 million after incorporating climate risk into its IFRS 9 models for corporate portfolios.

Rabobank’s move illustrates the direction of travel. As data, methodology and evidence mature, climate risk can move from a temporary management adjustment into the core calculation. The resulting reduction in overlays is therefore a change in how the risk is captured, not necessarily a reduction in the risk itself. Integration of climate risk into models is a trend likely to continue.

ECB-supervised banks report higher mortgage Stage 2 exposure

The share of Stage 2 loans at the four European Central Bank (ECB)-supervised banks ranged from 9.4% to 17.7% in 2025, while De Nederlandsche Bank (DNB)-supervised banks report a share of 0.2% to 3.7%. Although portfolio composition matters, it could indicate a divide in supervision on interest-only mortgages.

The gap may become less pronounced. In January 2026, DNB publicly stated that it was giving additional supervisory attention to interest-only mortgages together with the ECB. It highlighted dependence on collateral values, uncertainty about future affordability and limited information on repayment capacity. This suggests that risk identification and classification at DNB-supervised banks could face greater scrutiny going forward.

The same risk concerns are also beginning to shape lending policy. ECB-supervised banks ING, Rabobank, ABN AMRO and ASN Bank announced stricter origination rules in 2026, including a maximum interest-only component of 30% of property value and absolute caps on interest-only amounts.

What does this mean for banks going forward?

Interest-only mortgage risk is increasingly impacting banks through a combination of overlays, Stage 2 classification and stricter lending policy. The difference in treatment of interest-only mortgages between ECB- and DNB-supervised banks may narrow as supervisory attention becomes more aligned. Banks should re-think their interest-only lending practices, keeping a close eye on where the market is going. It requires a fundamental shift on how risk related to these loans is managed. Climate risk remains another supervisory priority and banks are starting to integrate climate risk into models. As the novelty of climate risk wears off and more information becomes available, banks should consider climate risk holistically as part of their credit risk processes and IFRS 9 models.

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