The Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation issued a statement Dec. 18 to reinforce cautious risk-management practices related to commercial real estate (CRE) lending.
The agencies said they have observed substantial growth in many CRE asset and lending markets, increased competitive pressures, rising CRE concentrations in banks, and an easing of CRE underwriting standards.
Financial institutions should maintain underwriting discipline and exercise prudent risk-management practices to “identify, measure, monitor, and manage the risks arising from CRE lending,” the agencies said.
In addition, financial institutions should have risk-management practices and maintain capital in keeping with the level and nature of their CRE concentration risk.
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