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The Federal Reserve’s Board of Governors expressed concerns about commercial real estate (CRE) lending despite the overall soundness of the banking sector. According to the November 2023 Supervision and Regulation Report, while banking organizations continue to maintain capital and liquidity levels above regulatory minimums and loan delinquency rates remain low, there are specific issues in bank lending to the commercial real estate sector.
The specific issues in CRE lending that the Federal Reserve is concerned about, as per their November 2023 Supervision and Regulation Report, include an increase in loan delinquency rates in the CRE and some consumer sectors from their previously low levels. Banks have also responded by increasing their provisions for credit losses. Delinquency rates for CRE and consumer loans have risen slightly during the first half of 2023, with the CRE office loan segment exhibiting the largest increase in delinquency rates among the largest firms. Additionally, many U.S. banks have increased provisions for credit losses, with provisions rising from an annual rate of 0.65 percent of average loans and leases in the first quarter of 2023 to 0.73 percent in the second quarte
You can read the full report from the Federal Reserve here.
