The European Central Bank (ECB) is urging eurozone banks to keep a close eye on their loan books—especially when it comes to small business and commercial property lending.
While the warning comes from Europe, the themes should feel familiar to Australian agents navigating a cautious lending environment at home.
ECB supervisor Sharon Donnery flagged areas of concern with Reuters, including loans to “non-prime” commercial properties, where environmental, social, and governance (ESG) factors are dampening demand. Sound familiar?
It echoes growing local conversations around energy ratings, office-to-residential conversions, and asset obsolescence.
Ms Donnery also highlighted early signs of stress in consumer credit and the potential for further deterioration if economic conditions shift.
Though non-performing loans (those unpaid for 90+ days) remain at historic lows, she urged banks to remain alert—particularly in light of ongoing geopolitical uncertainty and supply chain pressures.
For real estate professionals, the takeaway is twofold: commercial stock quality matters more than ever, and lending standards could tighten further, especially for small business buyers or marginal assets.
Agents working with SME tenants or investors should expect more lender scrutiny—and more questions about ESG risk and location resilience.
Ms Donnery’s final message was clear: “Vigilance is crucial,” especially when banks are exposed to sectors most vulnerable to economic shocks.
