German banks should prepare for wave of bankruptcies, Bundesbank says

FRANKFURT, Oct. 13 (Reuters) – German banks are set to brace for a surge in bankruptcies as the coronavirus crisis pushes weaker companies to the brink and calls into question the country’s property boom, the Bundesbank said on Tuesday .
With part of the government’s bankruptcy moratorium expiring, Germany’s central bank said business bankruptcies could increase by more than 35% by March to more than 6,000 per quarter, a level never before seen since 2013.
“The severe economic recession has raised fears that the number of company bankruptcies will rise significantly in the coming quarters,” the Bundesbank said in its annual financial stability report, with the rise expected to be higher in industry than in services and construction.
The impact on banks could be more contained as the most affected hotel industry represents a little less than 2% of the national loan portfolios of German banks, against 23% for real estate and construction.
The coronavirus pandemic could still cause problems for German real estate markets after they have exploded for years.
“An increase in unemployment and the number of household insolvencies could lead to an increase in defaults on home loans, while an increase in business bankruptcies and a change in the demand for office space could have a negative impact on the commercial real estate market, “said the Bundesbank. . (Reporting by Francesco Canepa; Editing by Edmund Blair)