On December 18, 2015, the US Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency jointly issued a statement calling for sensible risk-management practices regarding commercial real estate lending in light of the substantial growth in many commercial real estate asset and lending markets. The federal banking agencies urged financial institutions to maintain underwriting discipline and practice prudent risk-management in order to identify, measure, monitor, and manage the risks arising from commercial real estate lending. The agencies also noted that some of the risks associated with commercial real estate lending that they have observed include increased competitive pressures, rising commercial real estate concentrations in banks, and an easing of commercial real estate underwriting standards. The statement reinforces existing guidance for commercial real estate risk management in particular, the guidance on concentrations issued in December 2006.
The statement is available at: http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20151218a1.pdf and the 2006 Concentration Guidance is available at: https://www.gpo.gov/fdsys/pkg/FR-2006-12-12/pdf/06-9630.pdf.
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