2024-02-29 17:46:23
Falling real estate prices are putting a strain on banks’ balance sheets. The Bundesbank was now alarmed by this.
The crisis on the commercial real estate market is making the Bundesbank sit up and take notice. The issue must be “keep a very close eye on” in the coming months, said Bundesbank President Joachim Nagel on Thursday on the sidelines of a meeting of G20 finance ministers and central bank governors in São Paulo (Brazil). When developing individual markets such as commercial real estate, one should not lose sight of the issue of financial stability.
From a central bank perspective, it is of course important how the financial sector and the banks are positioned in this context. “And this shows that the measures we have taken over the last ten years are now definitely having an impact,” said Nagel. The banks are better capitalized and have a stronger liquidity position. This helps to keep risks manageable.
Recently, commercial properties have come under increasing pressure during the real estate crisis – especially offices, which are suffering from the trend towards home offices and are increasingly putting a strain on banks’ balance sheets. According to the Association of German Pfandbrief Banks, the fourth quarter of 2023 saw the largest price decline ever measured for commercial real estate. Among the banks in the EU, the institutions from Germany and France are particularly heavily involved in commercial real estate. According to insiders, the European Central Bank (ECB) has threatened banks with problematic commercial real estate loans with higher capital requirements.