FRANKFURT (Reuters) – Euro zone banks must take into account the risk of a further fall in house prices when making capital provisions and plans, the chairman of the supervisory board said on Tuesday prudential of the European Central Bank (ECB), Andrea Enria.
The ECB’s sharp rise in interest rates, which are now reaching record levels, has put the European real estate market under pressure.
Andrea Enria told banks to expect further difficulties as property prices have already fallen in several countries, notably Germany.
“The current high interest rate environment could increase downward pressure on office and housing prices, making it more difficult for commercial property owners and households to service debt,” he said. he summarized to the European Parliament.
“Banks should consider these risks in their capital provisioning and planning practices.”
The ECB, the euro zone’s main banking supervisor, sets capital requirements for banks and regularly opposes their plans to pay dividends or buy back shares.
Over the past decade, billions of euros have been invested in real estate thanks to low interest rates and massive liquidity injections, particularly in wealthier European countries like Germany, France and the Netherlands.
However, the rise in ECB rates has put an end to the surge in property prices, dried up bank financing and stopped transactions, a situation which is putting pressure on the solvency of developers.
(Written by Francesco Canepa, Corentin Chappron, edited by Kate Entringer)
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