While supervisors continue to underscore the importance of having robust risk-management practices for CRE and other lending concentrations, we do acknowledge that banks may pursue a variety of approaches. In some cases, such as when there is not enough market data available or the relevant geographic market is small, banks may have to turn to less quantitative approaches.
Nonetheless, those approaches should be robust, well documented, and transparent. This is consistent with the broader theme that risk management should be scaled to the institution. Along those same lines, we are not necessarily expecting smaller banks to be able to conduct regular, extensive and sophisticated quantitative stress tests around their lending concentrations.