Response to consultation on Guidelines on limits on exposures to shadow banking
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If real estate AIFs cannot finance their properties, major stakeholders could disappear from the real estate markets. A study on the interactions between the different kinds of vehicles in the German real estate market shows strong negative correlations, thus underlining the great importance and necessity of a greater variety of vehicles. Diminishing the variety of vehicles – be it inadvertently by any kind of regulatory measures – would have a strong negative impact on the German real estate market.
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The funds (Open ended and closed ended real estate funds) are important stakeholders in the market and they comprise approximately 30 to 40 % of the transaction markets.
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Real estate is the most important real asset class in the economy with over 80 % of the gross fixed assets with an amount of 14 trillion Euros. Stable real estate markets are therefore very important for the stability of the German economy.
Given the real estate market’s share of German GDP of roughly 20 %, there would be strong negative consequences for the German real economy.
6. Taking into account, in particular, the fact that the 25% limit is consistent with the currentlimit in the large exposures framework, do you agree it is an adequate limit for the fallback approach? If not, why? What would the impact of such a limit be in the case of Option 1? And in the case of Option 2?
The proposal goes far beyond the existing provisions to manage the credit concentration risk in CRD IV with regard to limiting the exposure caused by large loans. Only the largest loans have to be taken into account while the fall back approach of this shadow banking proposal includes every loan into the basis for the calculation of the limit of 25 %. Additionally it must be taken into account that the proposed 25 % overall limit would constitute just 1/32 of the overall limit for large loans in the former CRD II or just as much as one single exposure in accordance with article 395 par. 1 Regulation (EU) No. 575/2013. We are very concerned that the credit supply to AIFs could be interrupted. The interruption itself could cause a high risk for financial stability and the real estate markets.If real estate AIFs cannot finance their properties, major stakeholders could disappear from the real estate markets. A study on the interactions between the different kinds of vehicles in the German real estate market shows strong negative correlations, thus underlining the great importance and necessity of a greater variety of vehicles. Diminishing the variety of vehicles – be it inadvertently by any kind of regulatory measures – would have a strong negative impact on the German real estate market.
(chart)
The funds (Open ended and closed ended real estate funds) are important stakeholders in the market and they comprise approximately 30 to 40 % of the transaction markets.
(chart)
Real estate is the most important real asset class in the economy with over 80 % of the gross fixed assets with an amount of 14 trillion Euros. Stable real estate markets are therefore very important for the stability of the German economy.
Given the real estate market’s share of German GDP of roughly 20 %, there would be strong negative consequences for the German real economy.