The proposed guidance sets forth risk management practices that are well within the capabilities of many institutions and, in fact, a number of institutions already have many of these practices in place. Not surprisingly, the establishment of explicit thresholds in the proposal has generated significant controversy.
Bankers have argued that the thresholds are arbitrary and will be viewed as hard lending limits by examiners and the industry. I want to re-emphasize that the agencies' intent in proposing these thresholds was not to limit an institution's CRE lending but to ensure that risk-management practices are commensurate with this activity.