The European Central Bank (ECB) is reported to be planning to increase reserve requirements for German banks with large commercial real estate loan books – to protect against the risk of systemic commercial loan defaults.

This is expected to be introduced within months.

Banks with large commercial real estate loan books include Deutsche Pfandbriefbank and some Landesbanken.

This should reduce debt capital supply for German commercial real estate borrowers from one of the industry’s largest lending sources.

It provides an opportunity for investment bank DCM teams and private debt providers to support German commercial real estate companies. It should provide an opportunity to lend to this stressed sector at more attractive rates and with stronger protections for creditors.