Banks sidestepping losses on repossessed commercial properties

Banks sidestepping losses on repossessed commercial properties


It has been reported by the Times newspaper that state-backed banks, Royal Bank of


and Lloyds Banking Group are avoiding crystallising losses on commercial property by selling repossessed property assets to their own subsidiaries.

Commercial property values have fallen around 45% since their peak in 2007, and RBS and HBOS – now part of Lloyds – were the biggest lenders to commercial property companies.

However, rather than selling properties they have taken over from borrowers in arrears on the open market and incurring a hefty loss, they have set up their own subsidiaries to buy these properties.

This way, the subsidiary of the bank can buy the asset at a discount price and wait for it to increase in value. RBS has set up West Register to buy their repossessed properties, while it is believed that Lloyds has a similar vehicle.

Although it remains unclear how many properties are being kept within banks, it is thought that the subsidiary pays what the property would fetch on the open market, with industry sources claiming that the practice is legitimate and was widely used during the last recession of the early 1990s.

The consultancy Jones Lang LaSalle has estimated that


banks are facing around £100 billion of paper losses from their exposure to commercial property.


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