The governor of the Bank of England has warned that a sharp
increase in commercial property values raises some concerns about
future financial stability in the market.

According to Mr Mark Carney, European Regulators are currently
monitoring the European commercial property markets closely, with
risks to financial stability currently increasing as a result of
market's growth.

Mr Carney told the European Parliament that commercial real
estate valuations warranted closer monitoring as a result of moving
'quite notably in a number of jurisdictions'.  He also noted
that foreign investments had helped to push up property prices
substantially.

He also pinpointed a number of risks linked to unit trusts,
which move a number of investor's money together in order to buy
office blocks and other commercial ventures.

Mr Carney said:

"We are watching some developments, including the developments
in the public-traded commercial real estate market ... to ensure
that's not a potential amplification channel of financial
instability."

Though he did note that no immediate action was required to rein
in the market, the Governor did say that monitoring the markets
'makes sense'.

The Bank of England already flagged the dangers posed by the
commercial property market as part of its latest Financial
Stability Report (FSR) this month.  Sir Jon Cunliffe, the
deputy general for financial stability, noted that commercial real
estate was traditionally an area where British banks have taken
substantial losses during downturns.

The Stability Report described some West End offices as being
'overvalued', with Sir Jon noting that some London prices were
'particularly' stretched.

Mr Carney also warned that the so-called Solvency II Rules for
insurers needed to undergo reform.

"In my view, more can be done to ensure that Solvency II creates
the right framework for long-term investment," he said.

He also repeated his current criticism of EU bonus caps, which
he believed had 'tempered' regulatory efforts in an attempt to
tackle misconduct, and which had 'substantially' reduced the amount
of compensation that could be clawed back.

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