Currencies

Renminbi strengthens further despite gains by dollar

The renminbi on track for a fourth day of firming against the dollar on Wednesday after China’s central bank once again pushed the currency’s trading band (marginally) stronger. The onshore exchange rate (CNY) for the reniminbi was 0.28 per cent stronger at Rmb6.8855 in afternoon trade, bringing it 0.53 per cent firmer since it last […]

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Financial

Sales in Rocket Internet’s portfolio companies rise 30%

Revenues at Rocket Internet rose strongly at its portfolio companies in the first nine months of the year as the German tech group said it was making strides on the “path towards profitability”. Sales at its main companies increased 30.6 per cent to €1.58bn while losses narrowed. Rocket said the adjusted margin for earnings before […]

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Property

Spanish construction rebuilds after market collapse

Property developer Olivier Crambade founded Therus Invest in Madrid in 2004 to build offices and retail space. For five years business went quite well, and Therus developed and sold more than €300m of properties. Then Spain’s economy imploded, taking property with it, and Mr Crambade spent six years tending to Dhamma Energy, a solar energy […]

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Currencies

Nomura rounds up markets’ biggest misses in 2016

Forecasting markets a year in advance is never easy, but with “year-ahead investment themes” season well underway, Nomura has provided a handy reminder of quite how difficult it is, with an overview of markets’ biggest hits and misses (OK, mostly misses) from the start of 2016. The biggest miss among analysts, according to Nomura’s Sam […]

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Banks

RBS falls 2% after failing BoE stress test

Royal Bank of Scotland shares have slipped 2 per cent in early trading this morning, after the state-controlled lender emerged as the biggest loser in the Bank of England’s latest round of annual stress tests. The lender has now given regulators a plan to bulk up its capital levels by cutting costs and selling assets, […]

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Categorized | Property

Commercial property loans in spotlight


Posted on November 29, 2012

An area of acute concern for the Financial Policy Committee is lenders’ reluctance to admit to the losses they are likely to make on commercial real estate, which accounts for about half of all corporate lending.

Andrew Haldane, FPC member and the Bank of England’s executive director for financial stability, said on Thursday: “Our recommendation has been with an eye, in particular, to the commercial property market.”

    Commercial real estate loans are particularly susceptible to losses because of high loan-to-value ratios. A fifth of outstanding debt is on properties worth less than what companies owe the banks. Many loans need to be refinanced and more than a third are already subject to forbearance, leaving banks exposed if credit conditions were to tighten.

    Andrew Bailey, who is on the FPC and heads bank supervision at the Financial Services Authority, has expressed concerns. He told the FT in October that banks’ methods for assessing risks posed by commercial property loans were “bogus”.

    Mr Haldane said a portfolio-by-portfolio examination of British banks’ loans held on commercial property overseas had raised additional fears. “Six months ago, we said it was already the case then that there was some degree of underproviding on commercial property loans,” he said. “And having looked at some portfolios outside of the UK, we think that the extent of that provisioning might be greater still.”

    Mr Bailey said last month that transactions in the sector were so large and so idiosyncratic it was all but impossible to build models to determine whether an individual loan would default and what the losses might be.

    Banking supervisors have told banks they plan to change the rules for determining how much capital they will have to hold against the sector. Rather than rely on their own models, banks must use “slotting”, in which loans are assigned to categories with specific capital requirements attached. A final version of the categories is expected next year.