To All Bank Holding Companies, State Member Banks
and Others Concerned in the Second Federal Reserve District:
The federal bank and thrift regulatory agencies have issued for comment proposed guidance on sound risk management practices for concentrations in commercial real estate lending.
The agencies have observed that some institutions have high and increasing concentrations of commercial real estate loans where repayment primarily is dependent on rental income or from the proceeds of the sale, refinancing or permanent financing of the property. Such concentrations may expose institutions to unanticipated earnings and capital volatility in the event of adverse changes in the general commercial real estate market.
The proposed guidance—from the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and the Office of Thrift Supervision—reinforces existing guidelines for real estate lending and safety and soundness.
Comments are requested on all aspects of the guidance and are due 60 days after publication in the Federal Register, expected shortly.