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Financial Stability Board: Real estate market overheated: Financial supervision puts banks on a short leash

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The rise in prices on the residential property market worries the Bundesbank and the financial supervisory authority Bafin. You want to prevent excessive lending.

(Photo: dpa)

Frankfurt For home buyers, the acquisition of a property could become more expensive and more difficult in the foreseeable future: the German Financial Stability Council, the representatives of the Federal Ministry of Finance, the Bundesbank and the financial supervisory authority Bafin, the price surge on the German residential property market is scary. That is why he wants to oblige the banks to reserve more equity for residential property loans in the future.

This is likely to have consequences for credit terms: the more capital banks have to set aside for their lending business, the higher their interest rates have to be for customers so that the institutes can still earn money on the loan.

Specifically, the Financial Stability Board wants to activate the so-called countercyclical capital buffer for banks. This means that banks have to set aside additional capital for their business in addition to the normal requirements. For their activities as a whole, the institutes should reserve an additional 0.75 percent for their risk-weighted assets.

In the case of residential property loans, another two percentage points should be added. Overall, there is an extra buffer of 2.75 percent for private construction financing.

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Reference-www.handelsblatt.com

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