Commercial real estate poses a looming challenge for the US banks, which are still trying to recover from the collapse of residential property market
The US banks have been slow in taking losses on their commercial real estate loans that have suffered as property values sink – reported The Wall Street Journal, quoting the US Federal Reserve.
Initially, the source reported that the US central bank’s concern and Fed sources confirmed a presentation was made on the topic to regulators, but described it as a training exercise for examiners about potential real estate issues. The presentation was made by Fed analyst K.C. Conway, a senior real estate analyst at the Atlanta regional Fed bank.
Reportedly, it suggested that regulators were preparing for a rerun of housing-related losses that plagued many banks after the residential property bubble burst. The intent was to provide examiners who work directly with banks with training they might need to evaluate emerging risks.
The Federal Reserve reported that commercial real estate poses a looming challenge for the US banks, which are still trying to repair the damage done to them by the collapse of the country’s residential property market.
A severe US recession has crumpled demand for commercial real estate, which created massive losses on mortgage lending, making commercial property projects harder to finance. The International Monetary Fund in its Global Financial Stability Report revealed that the US banks still have not written down around 40%, or $400 billion, of their overall bad loans, reported the news agency.