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MNI BRIEF: ESRB Warns On Commercial Real Estate Sector Risk

(MNI) London

Europe’s commercial real estate sector could be a source financial stability risk as a result of high inflation, tightening financial conditions, the hit to growth caused by Russia’s invasion of Ukraine and Covid-19 related structural changes, the ECB’s financial supervision arm warned Wednesday, as it called for national authorities to improve risk monitoring.

Bank lending to the commercial real estate sector is still occurring at high loan-to-value ratios in a number of EEA countries, the ESRB said, with the potential to limit banks’ ability to maintain credit supply. Pension funds and commercial insurance providers may also be dangerous exposed, although there were marked differences across national jurisdictions.

“Adverse developments in the commercial real estate sector can have a systemic impact on the financial system and the real economy,” the European Systemic Risk Board (ESRB) warned, the effects of which can be amplified by cross-border spillovers and links between financial institutions.

MNI London Bureau | +44 20 3983 7894 |
MNI London Bureau | +44 20 3983 7894 |

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