The Bank of England has committed to further consultation on establishing a commercial real estate loan database following strong support from the industry.
The database was a key recommendation in the Vision for Real Estate Finance in the UK report, published by the Real Estate Finance Group in the summer.
The Bank said: “A loan database would help improve risk assessment, reduce the likelihood of financial stability problems and reduce the cyclicality of CRE lending.” However, it added that there were numerous data shortcomings at the banks that needed to be rectified and that consultation was needed to ensure the benefits outweighed the costs.
Peter Cosmetatos, chief executive of the Commercial Real Estate Finance Council and one of the authors of the Vision report, said: “Better ‘big data’ transparency around the CRE debt market presents a tremendous opportunity for UK banks and other lenders, debt investors, borrowers, and for financial stability and the economy as a whole. It is a vital first step towards a more stable UK CRE debt market.”
However, he warned that it was likely to be five years before a comprehensive database could be established.
Ion Fletcher, director of finance policy at the British Property Federation, agreed.
“Setting up a CRE loan database is likely to be a complex exercise. A number of issues need to be considered in detail and discussed with the industry to ensure that the benefits of developing such a database outweigh the costs,” he said.
The Bank is now considering how to capture data, how and whether to capture lending by non-regulated industries and how much data should be made publicly available.
