Dutch Say Banks’ Real Estate Capital Buffers, Provisions Suffice

The three biggest Dutch lenders have set aside sufficient capital to withstand losses on commercial real estate loans, the Dutch central bank said after reviewing of 60,000 loans.

Based on the outcome of its 2013 health-check of ING Groep NV, Rabobank Groep and ABN Amro Group NV, “the central bank is confident the banks made sufficient provisions and have enough capital on their balance sheets to absorb losses on commercial real estate” as of the end of last year, according to a letter published by the finance ministry today.

The Amsterdam-based central bank reviewed 70 billion euros ($96 billion) of commercial real estate loans after prices fell more than 15 percent from a peak before the financial crisis. A worsening real estate portfolio was the main cause of the downfall of SNS Reaal NV, the fourth-biggest Dutch lender, and led to its nationalization last year.

The total amount to cover losses anticipated by the central bank has more than tripled since the end of 2011, Finance Minister Jeroen Dijsselbloem said in a letter to parliament, citing the Dutch central bank’s review. That equals 6 percent to 8 percent of the total portfolio of commercial real estate loans at the three banks, he said.

The central bank carried out a two-stage review of Dutch lenders last year. The first, focused on models for assessing buffers and provisions, led it to impose additional capital demands. In the second phase, the regulator studied the loans and collateral.

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