SOURCE: Jacksonville Business Journal
With the recent boom in commercial loans, some members of Congress are concerned about proposed federal banking guidelines fed regulators are working on. The issue at hand is that regulators don’t want a repeat of the bank failures that occurred in the commercial market in the 1980’s and 1990’s. Early in the year, in an effort to prevent the past failures from occurring today, regulators issued proposals that called for banks that had high concentrations of commercial real estate loans to better manage the risk associated with the loans. Some of the risk management items mentioned in the proposal include:
- Making regular reports on market conditions
- Adding more capital
- Better tracking of assets, properties, tenants and developers
- Better and enhanced underwriting procedures, processes and practices
Some are concerned that regulators proposal being interpreted to mean that the regulators are going to set limits or caps on commercial real estate loans for banks and lenders. Regulators assured that this was not at all the purpose of the proposals, but a safeguard. Banks and lenders can have high concentrations of commercial real estate loans as long as they’re going to take proper steps to manage the increased risks of commercial real estate loans.
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