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Are commercial lenders at risk of over-exposure?

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  • 17/06/2002
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Commercial lenders could be over-exposing themselves in the market, the Financial Services Authorit...

Commercial lenders could be over-exposing themselves in the market, the Financial Services Authority (FSA) has warned. The latest De Montfort study of the UK commercial property market prompted chairman of the FSA, Howard Davies, to flag concerns over rapid growth in lending.

Davies said: ‘Commercial property lending continues to grow rapidly at a time when economic growth now appears to be at a standstill. We will continue to watch the performance of a number of building societies whose commercial property loans are growing as a proportion of their total loan books. Some of these societies may have less experience of the market than other lenders and of working out problem commercial loans.’

Andrew Turzynski, manager of First National Business Finance, which recently bought Sun Bank’s commercial lending book, agreed less experienced players should be monitored closely. ‘Many lenders, including some building societies and high street banks, are apparently ‘buying business’ combining low margin and high LTV and relaxing lending criteria. This reflects a naivety concerning the market they are entering, internal pressures from within and a new generation of lenders unfamiliar with the problems encountered ‘last time around.’ There must also be a question over the control and maintenance of portfolios going forward,’ he said.

But Skipton Building Society said it did not foresee any problems from over-exposure. David Cutter, operations director at Skipton, said: ‘Skipton’s commercial lending has been growing rapidly, but only a small proportion of this has been for stereotypical commercial properties ‘ the majority of lending in this area has been for the buy-to-let market.’


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