Several German banks have taken action recently to reduce their loan exposure to the US office sector on concerns about commercial real estate losses.

The moves come after bond and equity prices plunged in February when the lender then known as New York Community Bancorp cut dividends to build a bigger loss buffer. The New York Federal Reserve recently warned that banks have extended the maturity of their distressed CRE mortgages and ignored potential risks – otherwise known as extend and pretend – to avoid further depleting their capital.

The European Central Bank is now expected to require German banks to recognize unrealized losses on American assets as values have fallen precipitously, according to a Bloomberg report.

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