Real Estate Capital - December 2011

The Financial Services Authority is forcing UK banks to reassess the riskiness of their commercial real estate loanbooks or use its ‘slotting’ rules....

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From Jonathan Bain

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The Financial Services Authority is forcing UK banks to reassess the riskiness of their commercial real estate loanbooks or use its ‘slotting’ rules. The Bank of England and the FSA are uneasy about banks’ internal models for calculating the credit risks of commercial property loans and believe they are not setting aside... More

The Financial Services Authority is forcing UK banks to reassess the riskiness of their commercial real estate loanbooks or use its ‘slotting’ rules. The Bank of England and the FSA are uneasy about banks’ internal models for calculating the credit risks of commercial property loans and believe they are not setting aside enough regulatory capital to cover the risks. “The FSA felt people are applying the regime relatively aggressively and getting capital weightings lower than they should be,” said one banker. “All banks are being told their internal models are inadequate and the only alternative is slotting. ” Industry insiders say the move to make all banks slot their loans according to the FSA’s criteria mean risk weighting will inevitably be more conservative and require them to put more capital aside. This could reduce the amount and raise the price of lending to commercial real estate, they say. But the FSA has backed off introducing new, more prescrip Less

From Jonathan Bain