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Systemic risks from commercial real estate lending of Austrian banks

Author

Listed:
  • Marcel Barmeier

    (Oesterreichische Nationalbank)

  • David Liebeg

    (Oesterreichische Nationalbank, Financial Markets Analysis and Surveillance Division)

  • Sebastian Rötzer

    (Finanzmarktaufsicht (FMA))

Abstract

The commercial real estate (CRE) market in Austria – and many other countries – has been under stress at least since interest rate increases began in 2022. Consequently, the evaluation of financial stability risks in the CRE segment is of high relevance for supervisory authorities and policymakers. This study contributes to this goal by providing an integrated approach to gauge systemic risks associated with CRE financing. Combining macroeconomic information with data on the loan, firm and bank level, we estimate the effect of adverse macroeconomic conditions on CRE loan portfolios of Austrian banks. We find that in an adverse scenario, nonperforming loan (NPL) ratios could increase to levels seen in international historical crises and a sizable share of bank capital could be depleted. Thus, we conclude that CRE loans, in the event of a further deterioration of the economic environment, pose an increased risk to financial stability in Austria. This is in line with the assessment that Austria’s Financial Market Stability Board (FMSB) made in its 41st meeting.

Suggested Citation

  • Marcel Barmeier & David Liebeg & Sebastian Rötzer, 2024. "Systemic risks from commercial real estate lending of Austrian banks," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 48, pages 31-39.
    • Handle: RePEc:onb:oenbfs:y:2024:i:48:b:2
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    File URL: https://www.oenb.at/dam/jcr:1eeb6714-97c3-45ea-bf34-f1c3f771c598/03_FSR-48_Systemic-risks.pdf
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    More about this item

    Keywords

    commercial real estate; systemic risk; financial stability;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • R33 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Nonagricultural and Nonresidential Real Estate Markets

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