VCB urges banks to take into account the new drop in real estate prices.

Banks in the eurozone should take into account the risk of a new decline in real estate prices when building reserves and planning their capital, Andrea Enria, chairman of the European Central Bank's (ECB) prudential supervisory council, said on Tuesday.

The ECB's sharp rise in interest rates to record levels has put pressure on the European real estate market. Andrea Enria told banks that they should prepare for new difficulties as real estate prices have already fallen in several countries, including Germany.

"The current environment of high interest rates could exacerbate the decline in office and housing prices, making it even more difficult for commercial owners to service their debt. 'real estate and households'," he concluded before the European Parliament.

"Banks should consider these risks when shaping their reserving and capital planning practices.

The ECB, the main banking supervisor in the eurozone, sets equity requirements for banks and regularly opposes their plans to pay dividends or buy back shares. Over the past decade, billions of euros have been invested in real estate thanks to low interest rates and massive liquidity injections, especially in Europe's richest countries like Germany, France and the Netherlands. However, the ECB rate hike has threatened soaring real estate prices, dampened bank financing and stopped deals,''which is putting pressure on the solvency of real estate developers.

(Source: Reuters)