European Banks’ Commercial Real Estate Exposures ‘Visibly Deteriorating,’ ECB Finds
- Smaller specialized banks could experience stress: ECB study
- Lending practices can exacerbate loop with property funds
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Banks in the euro region have about €1.3 trillion ($1.4 billion) in outstanding loans to commercial real estate investors and credit quality is “visibly deteriorating,” European Central Bank researchers found in a study of the links between CRE and the financial system.
“Exposures are not evenly spread across banks, and a tail of smaller, specialized banks with larger exposures” may “experience stress,” according to the report. The researchers pointed to a rise in non-performing loans as evidence of the worsening creditworthiness.