The German Property Federation (ZIA) has welcomed the European Commission's latest communication on strengthening the competitiveness of the European banking sector. The document addresses key problem areas to bolster the European financial industry in a global context. The ZIA highlights that the European Commission has announced concrete legislative proposals for the first quarter of 2027 and calls for a fundamental cultural shift in supervisory law.
Ms Iris Schöberl, President of the ZIA, emphasised that the communication represents a departure from a one-sided zero-risk culture, without neglecting financial stability. For the real estate industry, this constitutes an important signal. New capital requirements should not be viewed in isolation from their impact on actual investments. Schöberl referred to a strategic conflict of objectives: while initiatives like the “European Housing Alliance” promote much-needed investment in housing, blanket capital surcharges lead to a structural increase in the cost of project financing. Accordingly, the ZIA welcomes the Commission's binding commitment to conduct detailed impact assessments based on the principles of 'Better Regulation' before future measures. The aim is to channel freed-up bank capital, flanked by regulation, specifically into new construction and existing stock refurbishment.
Core demands of the ZIA regarding banking regulation
- —Easing the Output Floor: The ZIA supports the European Commission's announcement to develop targeted proposals in this area to prevent a blanket increase in the cost of real estate financing, as the gradual increase in the Output Floor already ties up significantly more capital for banks.
- —Improvements for Project Companies (Unrated Corporates): The Commission recognises the challenge of the strict supervisory treatment of companies without an external rating. The ZIA welcomes the examination of abolishing the external rating requirement, as project developments are almost exclusively carried out through unrated special purpose vehicles (SPVs), which could trigger a significant price shock if no exemptions are made.
- —Financing the ESG Transformation: The announcement to evaluate the regulatory treatment of specialised and project financing for the energy transition is seen as a crucial lever to more efficiently meet the enormous capital requirements for the energy-efficient refurbishment of the building stock.
Further positions of the ZIA include strengthening alternative financiers and investment funds, as well as reducing over-regulation, particularly reviewing overlapping macro-prudential capital buffers and reducing liquidity restrictions for cross-border banks. The latter could free up to EUR 230 billion in liquid funds. The recognition of regional banks for SMEs and ensuring proportionate supervisory rules for these institutions, to safeguard local financing partnerships for medium-sized real estate companies, were also positively highlighted.
Implementation challenges and future prospects
Ms Schöberl urged a swift and focused implementation of the proposed measures. She emphasised the necessity of a systematic review of the regulation's impact on real estate financing, especially with regard to the Output Floor and the requirements for acquisition, development, and construction financing (ADC financing). These tie up significantly more capital for banks and complicate the realisation of much-needed new construction projects. A clarification that bank reporting obligations must not lead to double ESG data requests from real estate companies is explicitly supported by the ZIA.
Critically, the ZIA notes that the reform process has the potential to become linked with institutional debates, such as a further deepening of the banking union. Schöberl reiterated that necessary adjustments to banking supervisory law must be implemented quickly, independently of lengthy institutional reform debates. The ZIA will closely monitor the upcoming consultation process in Brussels to support the European real estate industry with its expertise in shaping an investment-friendly, competitive, and risk-appropriate supervisory framework. Europe faces significant investments, from new housing construction to the climate-neutral transformation of the existing building stock.
