FRANKFURT (Reuters) -Germany is loosening a regulatory measure designed to soften the blow of a property crisis, a sign that officials are somewhat less worried about fallout from the nation’s troubled real-estate industry.
BaFin, the German financial regulator, said on Wednesday that it would trim to 1% from 2% the amount it requires banks to hold as capital for residential mortgage loans.
“The vulnerabilities on the German real estate market have declined significantly, but have not yet been fully eliminated,” BaFin said.
Germany’s property sector, which began to shrink in 2022, is undergoing its most severe slump in decades. The turmoil has resulted in sharp drops in prices, stagnating sales and developers going insolvency.
Commercial buildings, like offices and retail space, remain under stress, but the market for homes has stabilized, with prices once again rising and new lending increasing.
BaFin’s move frees up capital that banks can deploy for other purposes by an estimated 2 billion to 2.5 billion euros ($2.84 billion), BaFin said.
The watchdog said it would at the same time keep in place a second charge of 0.75% – the so-called countercyclical capital buffer – that it had imposed in early 2022.
“The general risk situation continues to pose challenges, however, and the outlook is marked by high uncertainty,” BaFin said in justifying the maintenance of the buffer.
($1 = 0.8794 euros)
(Reporting by Tom Sims, editing by Thomas Seythal and Madeline Chambers)
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