11 Dec 2012

BoE concerned by commercial property loans

Insights, Property, Publications

‘The Bank of England’s director of financial stability, Andrew Haldane, has warned that at least a third of all commercial property loans are subject to forbearance, which means lenders have forgiven a breach of the terms of the loan.

Mr Haldane said that the bank is very concerned about the gulf that has opened between transaction volumes in London and the South East, which have returned to nearly 80% of pre-crisis levels, and in the rest of the country, which remains moribund.

He says the bank has looked at the area very closely “portfolio by portfolio”.

The Times notes that the Bank’s concerns should be taken very seriously as commercial property accounts for just under half of all UK corporate lending.

The FT reports that 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.’

Source: The Times, The FT