Exchange Rate Euro: European Banks Selling Off $30bn Worth of Property Loans

October 2nd, 2012
The Exchange rate euro is still in a volatile position; however European banks announced they are selling off $30bn worth of property loans in May 2012. The property loans are likely to transact at significant discounts which could prove to be a fantastic investment opportunity for both Continental property credit funds and independent investors. The opportunity counteracts poor exchange rate euro and opens the door for those wanting to invest in overseas property, particularly in emerging markets.
There have been a number of European banks retreating from markets or moving to domestic loaning over the past few months, these include Euro Hypo, Societe Generale, DG Hyp, Yorkshire bank and Clydesdale.
DTZ Investment Management, a top investment research company, suggests Italy, Germany, UK and Spain will be the main centres for sales. DTZ also predict a gradual increase in discounts as banks try to relieve non-prime stock. Santander was recently rumoured to have sold property loans to Morgan Stanley at a large discount of 60%.
All of this is happening amidst a rather gloomy outlook for Europe and exchange rates euro.  Europe needs in excess of $1trillion of refinancing over the course of the next four years.
Met Life are one of the many non banking institutions that have entered Europe’s market and  US insurers New York Life and Mass Mutual are also believed to be considering the move.
Even with lending from corporations outside of the banking arena, alongside hedge funds, this will not be anywhere near enough to fill the  vacuum left by Europe’s major banks. The anticipated funding gap in Europe is expected to more than double in the next two years – from $107 billion to $215 billion.
This situation will mainly be a result of the additional capital requirements by the European Banking Authority on 65 of Europe’s banks, having a larger effect than the recent $1trillion cheap loan program by Frankfurt’s European Central Bank. The EBA stipulates that 65 banks have to reserve 9% of capital, in line with the International Monetary Fund’s view that banks should cut back loan books by 6% to 10% by 2013. Europe will be accountable for around  85% of the $216 billion global funding gap over the next two years. This will be politically led by the UK, who will be responsible for around $35 billion and Spain, who will be responsible for $26 billion.
Best Exchange Rates UK regularly report on the money exchange market and exchange rate euro and how the financial markets can impact on opportunities for investment within Europe and the rest of the world, call us today for free impartial advice.