Regulatory Alerts2022-12-01
Added · Updated
Recommendation of the European Systemic Risk Board on vulnerabilities in the commercial real estate sector in the European Economic Area
Relevant authorities in the European Economic Area must closely monitor systemic risks stemming from the commercial real estate sector, including cyclical and structural vulnerabilities, on a regular basis of at least annually. Supervisory authorities are required to ensure that financial institutions maintain prudent risk management practices, adequate provisioning, and sound lending standards for commercial real estate exposures. Where exposures are material, designated authorities must activate appropriate capital-based or macroprudential measures to increase the resilience of credit institutions, investment funds, insurance undertakings, and pension funds. The European Commission is tasked with assessing the current macroprudential framework to determine if activity-based tools are necessary to ensure consistent risk treatment across the financial system.