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. However, we do want bankers at smaller organizations to have clear and coherent methods for evaluating the various potential outcomes associated with their CRE concentrations and with all their exposures more broadly.