The European Commission has chosen the RICS to undertake a detailed study of property lending across Europe, reports Catherine Wheatley.
The European competition watchdog has asked the RICS to produce an analysis of European property lending ahead of revising the rules which govern the amount of capital that banks have to set aside against commercial property loans.
Most banks are required to match property loans – Ecu for Ecu – with assets, but, under a 1989 agreement, banks in Germany, Denmark and Greece won an exemption. As a result they have double the financial capability to lend against property given the same capital base, compared with the rest of the community.
However, a proposed EC directive due to become law in January 1996 aims to harmonise lending regulations across the community and create a level playing field.
There are estimated property loans of £450bn in the EU, of which £81bn have been made by German banks. Any change in the rules will have a significant effect on the behaviour of the European property market.
The purpose of the RICS study will be to decide whether the three countries should be brought into line with the rest of Europe, or whether lending regulations should be relaxed to match those in Germany, Denmark and Greece.
Peter Champness, head of financial services at Gerald Eve, will chair the research panel, on which the RICS is being joined by City University, Westdeutsche Landesbank, Compagnie Bancaire and risk management group Guildhall.
Champness comments: “The European Mortgage Federation is thought to support relaxing the regulations to cover the whole of Europe, but it is too soon for us to predict the study’s outcome.”
Tbe Association of Property Bankers is also planning to carry out its own research into the issue.
