Germany’s Slow-Motion Property Crash Is a Looming Risk for Banks

As fears about US commercial real estate roiled German banks this month, their message was clear: don’t worry, the vast majority of our property exposure is domestic.

That may not prove the comfort it seems.

While the country has so far avoided the rapid market corrections that rattled the US, experts argue that reflects arcane accounting practices shielding its lenders and investors from taking immediate hits. Relatively modest adjustments and benign provisions obscure the fact that German lenders are more exposed to commercial real estate than most of their European peers and, according to one study, extended loans more aggressively ...