EUROPE – The European Central Bank’s (ECB) assumption of the role of banking regulator in Europe later this year is the prompt for a huge increase in the volume of property loans coming onto the market right now, Starwood Capital has said.
The ECB, which takes over responsibility for bank supervision in September, has announced a comprehensive assessment of all large banks including the asset quality review (AQR).
Peter Denton, head of European debt at the investment firm, said: “The AQR is one of the impetuses for what you’re seeing now – a massively increased number of loans being sold off.”
The AQR was “frightening a lot of banks because they have to get their books marked properly as much as they can,” Denton told the annual conference of the Urban Land Institute (ULI) in Paris.
The AQR deadline, which will follow the ECB’s September debut as supervisor, was only the first in a series of key dates coming up for banks in this regard, Denton said.
In 2015, they face the Basel 2.5 deadline, and, in 2018, they are arguably meant to be Basel III compliant, he said.
Despite the deadlines, up to now, most banks still do not meet the ratios required of them, Denton said.
Two things had saved them from adjusting their financial situation to comply with the requirements before now.
“One is, if they had tried to mark their books to these ratios, they’d all be bankrupt, so there was a conspiracy of silence, and then there was no liquidity – you couldn't actually raise money (…) so you couldn’t shift things,” he said.
However, Denton said now they did have the capacity to do something.
“You’ve got a lot of things all happening right now, improving world, the ability to do things and some pretty tough dates coming up, and that’s what’s creating the interest and the real change in the dynamics of what’s going on,” he said.