Supervision and Regulation Letters
Interagency Statement on Prudent Risk Management for Commercial Real Estate Lending
SUPERVISION AND REGULATION
|SUBJECT:||Interagency Statement on Prudent Risk Management for Commercial Real Estate Lending|
The Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency (agencies) are issuing the attached Statement on Prudent Risk Management for Commercial Real Estate Lending to remind financial institutions of existing regulatory guidance on prudent risk management practices for commercial real estate (CRE) lending activity through economic cycles.
The agencies have observed substantial growth in many CRE asset and lending markets, increased competitive pressures, and an easing of CRE underwriting standards. Therefore, the agencies are issuing this statement to remind financial institutions to maintain underwriting discipline and exercise prudent risk management practices that identify, manage, monitor, and control the risks arising from their CRE lending activity. The statement also reminds financial institutions that they should have risk-management practices commensurate with the level and nature of their CRE concentration risk. An attachment to the statement provides a listing of interagency regulations and guidance documents related to CRE.
Federal Reserve Banks are asked to distribute this letter to supervised institutions in their districts, as well as to supervisory and examination staff. For questions related to this advisory, please contact Donald Gabbai, Senior Supervisory Financial Analyst, at (202) 452-3358. In addition, questions may be sent via the Board's public website.1
Michael S. Gibson
Division of Banking
Supervision and Regulation