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The EU Defense Against the Coming Financial Tsunami Is a Straw Hat

Single Resolution Board (SRB) President Dominique Laboureix announced that the target of €78 billion endowment fund for the SRB has been reached: “We have been asking banks for about €10 billion a year for the past eight years. But now I am happy to announce to the banking sector that we will not issue a call for contributions for the current year.”

Laboureix’s statement comes in the middle of turmoil in the banking sector in the U.S. and Europe because of the commercial real estate crisis.

Real Estate prices in Germany fell 6.1% in one year, according to the Federation of Pfandbrief Banks. The reason for that are the increased costs of mortgage loans. This is putting pressures on the banking system. The German Pfandbrief Bank has compared the current crisis to the 2008 one, in a statement last week. In a statement last week that followed a slump in the price of its bonds, the bank said it shored up its risk provisioning for the year ahead with as much as $231.7 million set aside to deal with pain across the real estate sector.

“Despite these expenses, pbb remains profitable thanks to its financial strength—even in the greatest real estate crisis since the financial crisis,” the bank said in a statement Feb. 7. Morgan Stanley has recommended selling DP shares.

A TS Lombard chart shows that Northern European banks are the most exposed to CRE as a percentage of total loans to non-financial corporations (2022 figures). Sweden is on top of the list, with over 60%, followed by Denmark and Norway (50%), followed by Finland, Austria, Estonia, France, Luxembourg and the Netherlands. Then comes Germany with between 30% and 40%. Greece is at the bottom with less than 10%, while Italy is fifth-last with less than 20%.

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