The City watchdog has sounded alarm about the prospect of a meltdown in commercial property. Announcing much tougher stress tests for banks, the Financial Services Authority raised concerns that they are not setting aside enough to cover losses on the sector.

In its overview of the financial risks facing Britain this year, the FSA said about £160bn of UK commercial property debt would mature over the next five years. During the recession, many commercial property companies were supported by forbearance from banks, which often waived conditions attached to loans, it added