Kreditrisiko bei gewerblichen Immobilienfinanzierungen im Spannungsfeld von Regulatorik und Marktdynamik

Abstract

In the commercial real estate sector, structural changes and price developments, exacerbated by economic shocks such as the COVID-19 pandemic, have led to significant challenges. However, the raising of interest rates by central banks has further exacerbated financial instability in this sector, increasing the risks of loan defaults. This requires banks to adjust their risk provisioning and capital adequacy. Additionally, the banking sector faces the implementation of the Basel III reforms, which mandate intensified banking regulation. These two factors highlight the growing importance of credit risk management, which could have far-reaching effects on lending practices. Motivated by my professional experience in the credit service of a bank, this thesis aims to gain a deeper understanding of these complex dynamics. This bachelor's thesis explores the diverse challenges of credit risk in commercial real estate financing that banks face due to the interplay of regulatory changes and volatile market conditions. The investigation begins with an introduction to the fundamentals of commercial real estate financing, followed by an analysis of the credit risks. A special focus is on the regulatory capital requirements for credit risk, where both the current regulations are thoroughly examined and the upcoming changes through the Basel III reform are highlighted. Another focus concerns the treatment of real estate as loan collateral, which is common in commercial real estate financing and has a significant impact on credit risk. Special attention is also given to the valuation methods and the impact of market fluctuations, in addition to regulatory requirements. The analysis is based on a systematic literature review, including reports from the European Systemic Risk Board, the European Central Bank, and the Austrian National Bank. The findings of this thesis underline the complex dynamics and challenges in credit risk management in the area of commercial real estate financing. It is evident that market-driven changes have significant impacts on credit risk, both through the creditworthiness affecting the probability of default and through real estate collateral affecting the loss given default. The introduction of the Basel III reform is intended to strengthen the banks' resilience to market changes by prescribing higher capital requirements and stricter valuation criteria for real estate collateral. These stricter requirements are likely to promote a conservative valuation and could lead banks to reconsider their lending policies, particularly in high-risk engagements. Despite these regulatory measures, the primary responsibility lies with the banks to conduct a risk sensitivity analysis during the lending process and to ensure ongoing monitoring of their financings. These internal processes are crucial to proactively respond to market changes and minimize loan defaults. Continuous adjustment and refinement of risk management practices are necessary to efficiently meet dynamic market conditions and regulatory requirements.

Date of Award	2024
Original language	German (Austria)
Supervisor	Dietmar Buchner (Supervisor)