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Commercial Real Estate: Europe: Difference between revisions
→European Systemic Risks Board Report[8]
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=== European Systemic Risks Board Report<ref>https://www.esrb.europa.eu/pub/pdf/reports/esrb.report.vulnerabilitiesEEAcommercialrealestatesector202301~e028a13cd9.en.pdf?94fa2bfacc0cf836fa9f5003bd5a1651</ref> === | === European Systemic Risks Board Report<ref>https://www.esrb.europa.eu/pub/pdf/reports/esrb.report.vulnerabilitiesEEAcommercialrealestatesector202301~e028a13cd9.en.pdf?94fa2bfacc0cf836fa9f5003bd5a1651</ref> === | ||
[[File:CRE2.PNG|thumb|Share of CRE loans as a proportion of total bank loans: outstanding vs non-performing]] | |||
==== Importance of CRE markets for financial stability ==== | ==== Importance of CRE markets for financial stability ==== | ||
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* Banks have not sufficiently performed sensitivity analyses on CRE exposures, especially to measure the potential impact of an increase in interest rates. As a result of these weaknesses, the affordability of some borrowers may not be as robust as banks had originally assumed. | * Banks have not sufficiently performed sensitivity analyses on CRE exposures, especially to measure the potential impact of an increase in interest rates. As a result of these weaknesses, the affordability of some borrowers may not be as robust as banks had originally assumed. | ||
* There could be o significant asset value overstatement due to shortcomings in collateral valuation. | * There could be o significant asset value overstatement due to shortcomings in collateral valuation. | ||
* In most countries default rates for CRE loans are higher than those for the stock of loans in other segments of the economy. Germany share of CRE NPLs is 30%, with a 10% exposure. | |||