From a risk-management and capital perspective, institutions should generally focus on the emerging conditions in their real estate markets and on the potential cumulative impact on their portfolios if conditions deteriorate, and they should take other measures to help identify CRE vulnerabilities. Of course, these measures should vary according to the size of the organization and the level of the concentration.
As I noted, we are already seeing banks use AI in a number of ways, and we have regular discussions with them about understanding and managing the associated risks.6 Whether and how they might make use of generative language models remains to be seen.