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German regulator worried by banks' loose lending standards - Handelsblatt

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German regulator worried by banks' loose lending standards - Handelsblatt

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FRANKFURT (Reuters) - Germany's financial regulator is worried about aggressive lending by banks and might require them to build extra capital reserves to guard against a property boom getting out of hand, Handelsblatt reported on Sunday.

Residential property prices have been rising across Germany but are growing fastest https://www.bvr.de/p.nsf/0/2329CBC0D1CD8027C12582A20029C176/%24FILE/BVR_VolkswirtschaftKompakt%2005-2018.pdf in major urban centres, driven by people moving from the country and by immigration, stretching the affordability of home ownership.

"We are worried that some institutions are acting very aggressively and, in some cases, loosening their lending standards," Felix Hufeld, president of Bafin, told financial daily Handelsblatt in an interview.

Hufeld, according to extracts from an interview to be published on Monday, said Bafin would pay close attention to loose lending because the issue could lead to major problems.

"If further risks arise, such as geopolitical risks or a downturn in the economy and property prices, then a perfect storm could threaten," he told Handelsblatt.

His warning came after Germany's leading economic institutes cut their forecast for economic growth this year to 1.7 percent and warned that an escalation of trade frictions involving the United States could cause a major recession.

Hufeld declined to comment in detail on the possibility that Germany's banks might merge, amid continuing speculation that Deutsche Bank <DBKGn.DE> and Commerzbank <CBKG.DE> could join forces.

"Consolidation is an option, not a cure-all," said Hufeld. "It would be naive to believe that weak earnings can be structurally made to disappear with the wave of a magic wand."

Bafin would not "regulate a national champion into existence," the regulator also said.

(Reporting by Douglas Busvine. Editing by Jane Merriman)

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