Dealing with back-to-back loans BES

There seems to be unclarity at banks how to deal with back-to-back loans. Back-to-back loans are loans where the consumer (borrower) pledges the amount to be borrowed to the lender. When granting back-to-back loans to consumers, the following have to be taken into account. A back-to-back loan can also entail the risk of over-indebtedness. Specifically, the consumer has to pay interest charges on the loan, whereas the interest he/she receives on the underlying savings (amount pledged) is much less. The AFM considers that granting a back-to-back loan has to follow the same procedure that applies to the granting of a standard consumer loan or mortgage loan. Hence, when providing advice on a back-to-back loan, the AFM’s credit model has to be completed, including information about financial status, risk appetite, knowledge and experience, and purpose.