This advisory to insured state non-member banks and savings associations reemphasizes the importance of strong capital, appropriate credit loss allowance levels, and robust credit risk-management practices when managing commercial real estate concentrations. It replaces an advisory issued in 2008 that emphasized the same points during a period when commercial real estate market conditions had weakened, most notably in the construction and development sector.
The advisory conveys several key risk management practices for FDIC-supervised institutions to consider in managing commercial real estate loan concentrations in the current economic environment. It also continues to emphasize the importance of effectively managing liquidity and funding risks, which can compound lending risks, particularly for institutions with commercial real estate concentrations. The advisory does not create new risk management principles, but it updates and builds upon previously issued guidance.
The full advisory is available as a download below.
