European banks struggle with $1.5 tn loans for property industry

The European banks have approximately 1.4 trillion euros ($1.50 trillion) in loans allocated to the beleaguered commercial property industry, according to a feature story published by Reuters on Thursday.

The genesis of this predicament can be traced back due to a sharp decline in office prices in both Europe and the United States, leading to concerns about the banks’ ability to manage the associated risks.

German banks are under particular scrutiny as the country is experiencing its worst real estate downturn in decades, characterised by insolvencies, halted construction, and a freeze in property transactions.

Last week, investors sold off shares of a top German property financier due to concerns about its exposure to the U.S. market, Reuters added.

The repercussions of the real estate downturn possess the potential to impact banks in France and the Netherlands, both of which occupy significant roles as major lenders within the European commercial real estate market.

(1 U.S. dollar = 0.93 euro)