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Ceturtdiena 20.02.2020 | Name days: Smuidra, Vitauts, Smuidris
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ECB: the next crisis could be associated with real estate market

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUThe next crisis Europe and the world might experience in the future could be associated with the real estate market and mortgage lending, allows European Central Bank’s Supervisory Board chairperson  Danièle Nouy.

«Growth in the real estate market and commercial properties market is considerable in terms of both prices and deals. I believe risks are created by use of changing interest rates, because there are no guarantees that when rates increase so will the revenue of companies and wages paid to residents. Loan payments will increase for certain. We will follow developments on the real estate market very closely. This applies to not only to Latvia and Baltic States, but other countries, as well,» says Nouy.

She adds that people should be prepared for the crisis and banks should be secure and stable, as well as provide capital of sufficient quality. According to Nouy, currently the average first level base capital index in Eurozone banks is above 14%, which significantly exceeds pre-crisis level.

«Next year, we will perform liquidity stress tests. Although we have observed a surplus of liquidity and money is cheap, there are banks that were not able to secure sufficient operational capacity and additional liquidity attraction on the market under pressure. Banks should be prepared for possible liquidity restrictions,» said ECB Supervisory Board chairperson, adding that currently there is Single Resolution Mechanism.

«This means we are much better prepared for a crisis, because crisis management mechanism in place is strong,» says Nouy, adding that the situation with ABLV Bank was a good test, because it came unexpectedly.

«It was a good test for our capacity and ability to make the right decisions in a short period of time. Everything important was performed within several days. This is why I would like to say that we are better prepared now,» admits ECB representative. As for problems, she mentioned that European Deposit Insurance Scheme still has not been adopted.

«The only thing that is perfectly clear – there will be a new crisis. But we do not know when or why,» she said.

ECB operates the single bank monitoring mechanism the main goal is ensuring security, sustainability and stability of European banking system. As part of this mechanism, ECB performs monitoring of banks. This practice was adopted in November 2014. In cooperation with Latvia’s Finance and Capital Market Commission, ECB monitors Swedbank, SEB Bank and Luminor Bank.


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