Commerzbank, which owns Eurohypo, announced the temporary suspension of new business two weeks ago, as part of its wider strategy to meet the revised capital requirements of the European Banking Authority for all eurozone banks to raise a 9% tier one capital ratio by the end of June next year.
The new lending suspension, which affects all Eurohypo’s active markets is indefinite but temporary. It is understood that this timeframe may be linked to Commerzbank meeting the EBAs requirements which have a target of the end of the second quarter 2012.
Eurohypo’s head of origination Michael Acratopulo told CoStar News: “There were some deals in the pipeline that were at an advanced stage and we have made the decision to proceed with those deals and continue to support the clients involved."
“In terms of the existing deals it is business as usual clients will continue to be able to draw upon agreed facilities, subject to those terms and conditions. That hasn’t changed at all.”
Eurohypo’s London office manages a 7bn UK real estate loan commitments which, together with agency, loan servicing and capital market positions, the overall loan book managed out of London is around 15bn.
He added that whilst the announcement had been sudden "the wider dynamic at play is becoming more and more understood. The capital ratio requirement for the summer of next year is out there and it is an issue which all eurozone banks are wrestling with. Banks are all trying to manage their position in respect of that target and are going about it in slightly different ways but the end game is very similar."
As for his eight-strong origination team in London and the wider circa 65-strong staff, under UK managing director Max Sinclair, Acratopulo said there are no planned headcount reduction plans. He added: “We want to be in a strong position when this period of temporary new business suspension comes to an end.”
On Wednesday, CoStar News was first to reveal the suspension of new lending by Société Générale which had only very recently made high profile additions to its team to bolster planned new lending ambitions next year.
Like with Commerzbank’s decision, Société Générale’s board has taken the decision to cease new lending as it seeks to meet revised tier one capital ratio requirements.
“Whilst Eurohypo has never been the biggest lender to UK property, compared to the clearing banks, it has always been an intelligent lender and it did lend on big projects and to major partners,” said one banker.
Many believe more banks will follow suit, either in temporary suspension, or stricter criteria and lower balance sheet capacity and banks grapple with the revised EDA targets just seven and a half months away.
All of which makes for a tougher lending market next year and beyond, which comes at a time the increasing wall of refinancing looms ever larger.
jwallace@costar.co.uk