ESRB urges improvement of systemic risk monitoring for commercial real estate

Published: 03 February 2023

The European Systemic Risk Board (ESRB) has published a recommendation urging EU and national authorities to improve monitoring of systemic risks in the commercial real estate sector and to ensure that financing practices in the sector are sound and that financial institutions are resilient. The ESRB identified vulnerabilities in the commercial real estate sector that could have an adverse impact on financial stability and the real economy, including current macro trends and structural changes like climate-related economic policies and the impact of the COVID-19 pandemic on working models. Importantly, the ESRB highlighted liquidity mismatches in open-ended real estate investment funds as one of the vulnerabilities for the non-banking sector, along with credit risk on commercial real estate loans. The ESRB has also published a detailed report on the identified vulnerabilities.

For more information, please contact Guillermo Pérez Molina, Private Credit Associate.