Systemic risks from commercial real estate lending of Austrian banks

Marcel Barmeier (), David Liebeg () and Sebastian Rötzer ()
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Marcel Barmeier: Oesterreichische Nationalbank
David Liebeg: Oesterreichische Nationalbank, Financial Markets Analysis and Surveillance Division
Sebastian Rötzer: Finanzmarktaufsicht (FMA)

Financial Stability Report, 2024, issue 48, 31-39

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.

Keywords: commercial real estate; systemic risk; financial stability (search for similar items in EconPapers)
JEL-codes: G01 G21 G28 R33 (search for similar items in EconPapers)
Date: 2024
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