Regulators seek comment on new lending guidelines
New Hampshire, like many other regions in the country, has enjoyed robust growth in the commercial real estate market. The subsequent lending activity, however has prompted federal bank regulators to propose new guidelines focusing on sound risk management practices for all banks in an attempt to protect against perceived vulnerabilities associated with maintaining high concentrations of commercial real estate loans.
The new set of guidelines released by the Federal Reserve Board, the Federal Deposit Insurance Corp., Office of the Comptroller and the Office of Thrift Supervision, focuses on concentrations of loans considered particularly vulnerable to cyclical commercial real estate markets.
Included in that category are loans whose source of repayment depends primarily on rental income or the sale, refinancing or permanent financing of the property.
Loans to real estate investment trusts and unsecured loans to developers whose business would be affected by risks associated with the commercial real estate markets also would come under scrutiny.
The proposed guidelines provide criteria for identifying institutions where commercial real estate loan concentrations may warrant greater monitoring and puts in place thresholds for risk management. The guidelines also address the need for increased capital commensurate with the risk level of the commercial real estate portfolio and places “ultimate responsibility for the level of risk taken” on the institution’s board of directors.
Comments on the scope of the definition of CRE and the appropriateness of the thresholds for determining elevated concentration risk will be of particular interest to the Agencies, but comments on all aspects of the proposed guidance are being requested.
Comments are due 60 days after publication of the guidance in the Federal Register, which is expected shortly. — TRACIE STONE