Imminent wave of commercial real estate loan defaults could devastate community banks

Dire news from from the Congressional Oversight Panel, which announced a new report yesterday concluding that a surge of commercial real estate loan defaults will hit small banks hard.

Community banks, unlike the largest Wall Street banks, face the greatest risk of insolvency due to mounting commercial real estate loan losses. According to federal guidelines, 2,988 banks nationwide are classified as having a "CRE Concentration." None of these banks are among the 19 largest bank holding companies. Forecasts project that banks will suffer their worst losses well after the timeframe examined by the stress tests – an exercise conducted only on the nation’s 19 largest bank holding companies – and well after Treasury’s authority expires under the Troubled Asset Relief Program (TARP).

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3 Responses to Imminent wave of commercial real estate loan defaults could devastate community banks

  1. Pingback: Imminent wave of commercial real estate loan defaults could devastate community banks «

  2. Eddie Katz says:

    Agreed. At our site, http://www.gohoming.com, we focus on REO homes for sale, but see a lot of data that forecast this event and it is very troublesome. Virginia has many of these assets.

  3. This is already happening in many cities across the country. Our Atlanta commercial real estate market has already seen many small banks fold. The FDIC has practically set up shop in Atlanta to handle this. In almost every commercial REO property I deal with the FDIC is involved.

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