Dutch lenders, with almost €80 billion ($103 billion) in commercial real estate loans on their books, haven’t set aside enough money to cover potential losses, according to the country’s central bank.

Banks have set aside less than 2 per cent of the total, an amount “insufficient to absorb large losses,” the Dutch central bank said in a report. In addition, valuations of the properties backing the loans are often outdated, according to the report.

The office vacancy rate in the Netherlands is 14 per cent, the central bank said, which is among the highest in Europe. Dutch commercial real estate prices have been falling for four years, dropping by about 12 per cent from a September 2008 peak, the bank said. Supply will probably continue to outweigh demand as online retailing rises, office space is used in a more flexible way and the workforce grows more slowly.

The bank supervisor said it’s hard to value properties because of a lack of transparency and liquidity. About half of collateral appraisals are more than a year old, according to a survey of banks’ loans, the central bank said.

“In the current environment, banks that base their valuations on outdated or inaccurate appraisals underestimate the risk facing their loan portfolios, particularly in view of the recent decline in values and the high vacancy rates,” the central bank said.

Lenders should have their real estate collateral appraised at least once a year by an independent company if there is a high possibility the collateral has lost value, according to the report.