MCOB 2A.3 Foreign currency loans
Where an MCD regulated mortgage contract relates to a foreign currency loan, at the time the MCD regulated mortgage contract is entered into the MCD mortgage lender must ensure:
- (1)
the consumer has a right to convert the MCD regulated mortgage contract into an alternative currency under specified conditions; or
- (2)
there are other arrangements in place to limit the exchange rate risk to which the consumer is exposed under the MCD regulated mortgage contract.
[Note: article 23(1) of the MCD]
The “other arrangements” referred to in MCOB 2A.3.1R (2) may include:
- (1)
a cap; or
- (2)
a risk warning (where a risk warning would be sufficient to limit the exchange rate risk (if any) to which the consumer is exposed).
Where:
- (1)
an MCD regulated mortgage contract is denominated in the currency of the EEA State in which the consumer is resident ("currency A"); and
- (2)
the consumer receives income or holds assets in currency A but also receives income or holds assets in another currency ("currency B");
the MCD regulated mortgage contract will not be a foreign currency loan unless the credit is to be repaid wholly or in part from the income received or assets held in currency B.
The alternative currency referred to in MCOB 2A.3.1R (1) must be either:
- (1)
the currency in which the consumer primarily receives income or holds assets from which the credit is to be repaid, as indicated at the time that the most recent affordability assessment in relation to the regulated mortgage contract was made; or
- (2)
the currency of the EEA State in which the consumer either was resident at the time that the MCD regulated mortgage contract was entered into or is currently resident.
[Note: article 23(2) of the MCD]
Where a consumer has a right to convert the MCD regulated mortgage contract into an alternative currency in accordance with MCOB 2A.3.1R (1), the exchange rate at which the conversion is carried out must be the market exchange rate applicable on the day of application for conversion, unless otherwise specified in the MCD regulated mortgage contract.
[Note: article 23(3) of the MCD]
A firm must disclose to the consumer its arrangements for complying with the obligations in MCOB 2A.3.1 R in the MCD regulated mortgage contract.
[Note: article 23(6) of the MCD]