CRE high on worry list after rate hike surge
European banks seen better sheltered than U.S. analysts
But fault lines there, Germany, Nordics in focus

LONDON, April 20 Reuters European banks appear better positioned than U.S. peers to weather any stress from commercial property after an interest rate surge, but that does not mean Europe is out of the danger zone.

Aggressive rate hikes, still working their way through the system, follows a pandemic that hurt foot traffic to bricksandmortar retail locations and structurally changed work habits, with office occupancy rates still below preCOVID levels.

International Monetary Fund estimates suggest banks39; direct exposure to commercial real estate CRE was around 6 of bank loans on average in Europe, versus about 18 in the United States last year, meaning Europe appears less vulnerable to risks, analysts say.

Yet, with policymakers alert for what buckles under much higher borrowing costs, potential fault lines are being scrutinised.

Nordic banks and CREspecialist German banks could be pockets of weakness, especially if systemic risks emerge, Barclays said on Wednesday.

And although CRE risk was not front and centre of last week39;s IMF meetings in Washington, concern was visible.

IMF Managing Director Kristalina Georgieva stressed the need to monitor risks that may be hiding in the shadows, in banks and nonbank financial institutions or in sectors such as CRE. In its financial stability report, the IMF noted growing…