| Moody’s Analytics:Banks’ real estate exposures in CEE demand focus on risk assessment,stress-testing |
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05/11/2009 17:44 (16 Day 05:31 minutes ago) | |||||
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The FINANCIAL -- Banks’ relatively large concentrations of commercial real estate assets in Central and Eastern Europe (CEE) present them with particular challenges amid the current financial turmoil, despite some signs of an improvement in conditions in the region.
To survive the turbulence of a restabilising economy, banks need to revisit the way they assess, measure and manage the credit risk of their current and potential exposures to commercial real estate in the CEE region, Moody’s Analytics Risk Management Services says in a new report.
“Commercial real estate investment volumes in CEE have fallen dramatically this year for a number of reasons, including increased investor interest in more transparent markets that display lower macroeconomic risks. However, there are early signs that, following the IMF bailout in the region, conditions are starting to ease,” explains Valeriu Bajenaru, Engagement Manager at Moody’s Analytics Risk Management Services and author of the report.
Banks, in particular, will play a key role in providing medium-term liquidity amidst what remains a riskier operating environment and most major Western banks have reaffirmed their ongoing involvement in the region.
“In this context, banks need to gain a better understanding of the risk drivers inherent in commercial real estate projects, incorporate them into their internal risk assessment tools and perform thorough and periodic stress-testing of their portfolios to ensure the risk levels are consistent with their risk appetites. This will not only enable them to have a better handle on their risks, but will also help incorporate a risk perspective into their strategic decision-making and long-term development plans,” Mr Bajenaru adds.
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