I noted that CRE underwriting appears substantially better compared with the late 1980s and early 1990s. However, we have noticed some slippage recently. Therefore, the proposed CRE guidance underscores the existing interagency guidance on real estate lending standards. That is, it offers some reminders about risk-management practices for individual exposures.
For example, banks may occasionally be inclined to make some compromises and concessions to borrowers in order to attract new business and sustain loan volume. As supervisors, we want to ensure that loan-to-value standards and debt-service-coverage ratios are meeting the organization’s policies--and that there is not an undue increase in the exceptions to those standards and ratios.