In the future, banks will have to set aside more equity for mortgage lending. That criticizes the financial industry.
(Photo: dpa)
Frankfurt A targeted stab by the financial supervisors against the bloated real estate market in Germany causes excitement among banks and savings banks. From February 2023, the financial supervisory authority Bafin will require banks to have more equity for loans in general and for private construction financing in particular. The capital surcharge for normal loans should then rise by 0.75 percentage points above the usual level, and for loans for private real estate financing it is even 2.75 percentage points more.
The planned conditions may be uncomfortable for banks and savings banks: for many, credit growth is the preferred strategy to provisionally cushion the interest income that is crumbling under the pressure of monetary policy. Above all, the growth in construction financing has so far been an important source of income. The criticism of this step is correspondingly loud.
But the decision of the financial supervisors was overdue – especially since it only ended a risky German special path: Other European supervisors have long since taken measures to protect private construction financing from excesses on the real estate market. This applies to the Netherlands as well as to France or Austria. Sometimes it’s about debt ceilings for borrowers, sometimes about the necessary use of equity by banks. So far, this has not led to major upheaval anywhere.
The loose monetary policy of the European Central Bank (ECB) is an argument in favor of pressing the brake pedal when granting loans: Because of the flood of liquidity, many risks are difficult to identify and also not always avoidable.
Top jobs of the day
Find the best jobs now and
be notified by email.
The supposed stability of the German real estate market could also prove to be deceptive: long-term fixed-interest loans do provide a certain level of security. But there are also warning signals: Customers who have the purchase price of their property financed by the bank in full and sometimes even including ancillary costs are no longer a rarity in Germany.
This can work as long as unemployment stays as low as it is. But who wants to bet that things will stay that way during a period of upheaval? The corona pandemic, the climate-neutral restructuring of the economy and sooner or later the change in monetary policy by the ECB will pose three challenges for the German economy and the financial sector in the foreseeable future.
If the optimists are right, the buffers can soon be dissolved again. If the warners are right, the banks can thank the supervisors. Criticism of the measures is therefore short-sighted.
More: Real estate market overheated: financial supervision is imposing stricter rules on banks