MNI BRIEF: CRE Loans, NBFI Losses Main Banking Risks  - Enria

Bullet or balloon loans in the commercial real estate sector and unrealised losses in the non-bank financial sector are the two biggest risks facing the banking sector, ECB Supervisory Board Chair Andrea Enria said Tuesday.

Speaking to the European Parliament’s ECON Committee Enria said these two areas are the ones that concern him the most. The commercial real estate area was particularly “delicate”, he said, given that there has already been a “significant” price correction in the sector.

“Usually the developers refinance them. Now with the higher interest rate we can have quite a large gap in terms of cost to be filled so that is a risk I see as quite prominent.”

Enria said he also worried about a number of non-bank financial institutions which had taken out “increasingly leveraged and concentrated positions”, suspecting quite a significant amount of unrealised losses existed in the sector.