Société Générale is understood to be suspending new lending to European property indefinitely. The move follows a major review of the bank's activities triggered by the new Core Tier 1 regulatory requirements under Basel 3.

The French financial group, which only a month ago was leading a bank consortium providing EUR 328 mln of debt to a multi-asset portfolio in Germany, is pulling the plug on new lending as a result of turbulent financial markets and growing economic uncertainty. The withdrawal of new lending will not affect deals which had already been granted credit approval.

The move comes as a major blow to the real estate industry, which is still absorbing the news that Commerzbank's commercial property lending subsidiary Eurohypo has suspended new business until end-June 2012.

Soc Gen first announced in September that it was planning to step up significant bank-wide balance sheet deleveraging. The bank is looking to free EUR 4 bn of capital by 2013 through business asset disposals.

According to press reports, the lender - which has a EUR 4 bn European real estate loan book - is pressing ahead with the restructuring and is already marketing a EUR 300-500 mln non-performing loan portfolio.

A spokesperson for Société Générale declined to comment.

The initiative marks a major turnaround in the strategy of the bank, which in June hired ex-Lehman co-head of UK real estate James Jakeman to head its real estate structured finance team in the UK.