Commercial real estate NPLs hit 4.3 percent amid elevated EU risks

EU real GDP growth reached 1.5 percent in 2025, while European banks sustained an aggregate return on equity of 10.4 percent in the fourth quarter.

Capital adequacy and liquidity buffers remained solid, with bank non-performing loan ratios staying below 2.0 percent.

However, non-performing loans in commercial real estate stabilized at an elevated 4.3 percent.

Total assets in the non-bank financial intermediation sector grew to 50.7 trillion euros, representing 42 percent of all EU financial assets.

High leverage and concentrated exposures in non-banks create severe spillover channels.

At the same time, EU aggregate government debt stood at 81.7 percent of GDP, with ten Member States subject to excessive deficit procedures.

To address emerging vulnerabilities, the General Board agreed to develop a top-down system-wide stress-testing tool based on the ECB's ISA model.

The ESRB also adopted Recommendation ESRB/2025/9 to counter financial stability risks from third-country multi-issuer stablecoins under MiCAR.

Across the European Economic Area, 25 countries have announced or implemented positive countercyclical capital buffer rates.

Additionally, the ESRB proposed three borrower-based tools for commercial real estate lending: income-stretch, financing-stretch and loan-to-value limits.