The European Commission published on December 2 2008 a study on the activities, regulation and supervision of mortgage lenders that are not registered as 'credit institutions' under the laws of its member states, inviting comment from all interested parties.

A follow up to a report on the integration of mortgage credit markets in the European Union published in 2007, the study will contribute to the Commission's assessment of whether it needs to regulate the sector more extensively, the EC's press service said in a statement.

"This study is of great significance in the current financial context," the bloc's internal market and services commissioner Charlie McCreevy said. "It will help the Commission to assess whether there are any regulatory gaps in the supervision of EU mortgage lenders, and whether new measures are needed to address them."

The study highlights the wide range of regulatory frameworks in use throughout the EU, from needing a banking licence to operate in France or Austria to giving loans as long as they do not take deposits, as is the case of the UK and the Netherlands.

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 per cent of sub-prime mortgages, the EC statement said.

Concerning Bulgaria, no data exists on the volume of residential mortgage lending for credit institutions and the Bulgarian National Bank (BNB) was unable to provide estimates of mortgage lending by non-credit institutions. The only data available is for banks, who have granted mortgage loans worth a total 3.63 billion euro over the period 2004/07 covered by the study.

In Bulgaria, institutions that give residential mortgage loans do not need to be registered as credit institutions, needing only to notify BNB that they do so. Non-credit institutions can lend using funds other than deposits from the public or “other repayable funds”, which means that they cannot obtain funding from general debt securities, mortgage-backed securities or covered mortgage bonds, only from loans or shareholder funds.

Comments on the study can be filed with the EC until February 28 2009, after which the Commission will decide whether it needs to draft more legislation at the EU level.