Fed Flags Potential Risks Tied To Office Space, Capital Planning
DevinFederal Reserve bank supervisors are monitoring community and regional banks' commercial real estate portfolios amid concerns over "elevated interest rates, tighter underwriting standards, and lower commercial property values," the agency said.
Federal Reserve bank supervisors are monitoring community and regional banks' commercial real estate portfolios amid concerns over "elevated interest rates, tighter underwriting standards, and lower commercial property values," the agency said.
The central bank said those factors may affect borrowers' ability to refinance or pay off their loans, according to a supervision and regulation report released Monday. Officials are monitoring commercial real estate loan trends in addition to closely reviewing underwriting practices and credit loss reserve levels.
Among Wall Street lenders, the agency's watchdogs are monitoring for weaknesses in capital planning and liquidity risk-management practices among such lenders. Still, the Fed report found that the vast majority of banks continued to report capital levels well above applicable regulatory requirements as of the second quarter.
"Stress test results showed that large banks are well positioned to weather a severe recession while maintaining minimum capital requirements and the ability to lend to households and businesses," according to the report.
These areas of focus come as Fed Vice Chair for Supervision Michelle Bowman has urged supervisors to shift their focus to material risks rather than become distracted by process-related items that do not impact a firm's safety and soundness.
US regulators have recently moved to ease several capital requirements and finalized changes last month to its supervisory rating framework for large banks.
