We seek to assess the effect of changes in commercial property prices on bank behaviour
and performance in a range of industrialised economies, extending the existing micro literature on
bank performance. The results suggest that, consistent with macro-level studies, commercial property
prices have a marked impact on the behaviour and performance of individual banks. The signs found
are consistent with a view that commercial property provides important forms of collateral that are
perceived by banks to reduce risk and encourage lending. Such an impact exists even when
conventional independent variables determining bank performance are included. Moreover, there is
evidence that the magnitude of this impact is related to the size of the bank, the direction of
commercial property price movements, and regional factors. The results have implications for risk
managers, regulators and monetary policy makers. Notably, they underline the crucial relevance of
commercial property prices as a macroprudential variable that warrants close scrutiny by the
authorities. They also highlight the need to develop indicators of individual bank exposure to the
property market that could help to calibrate the potential impact of changes in prices in stress tests
