Naturally, supervisors from time to time have concerns about growing credit risk concentrations at banks and bankers’ ability to manage them. A current example is commercial real estate (CRE). The U.S. banking agencies recently issued proposed guidance on CRE lending, and a major portion of that guidance is directed at CRE concentrations. The agencies have received many comment letters on the proposed guidance.
These comments will be very helpful as we discuss what steps to take next. Before I discuss the importance of managing CRE concentrations, I want to emphasize that the proposed CRE guidance is intended to encompass “true” CRE loans.