Enhanced regulatory scrutiny
In December 2006, the Interagency Guidance on Commercial Real Estate Concentrations was released. Since then, a number of significant events have focused additional scrutiny on CRE lending including, the sub-prime lending crisis, some sizable bank failures, and unprecedented bail-outs of the investment banking sector. These factors, along with the steady decline in bank performance due to a downturn in the economy, have led to a heightened regulatory emphasis on the quality, safety, and soundness of the industry’s CRE loan portfolios.
Many financial institutions have not been adequately prepared for the intensity and detail of this new examination focus. You need to be fully prepared as any weakness in the management process will be exposed and the cost to remedy these oversights can be substantial.
Specifically, the Guidance calls for the adoption of seven best practices:
- Board and management oversight of the CRE portfolio
- The adoption of a portfolio management process
- The use of management information systems to provide information required to adequately manage the CRE portfolio
- Performance of market analyses
- The development of credit underwriting standards
- CRE loan portfolio stress testing and sensitivity analysis
- Continual review of the risks associated with CRE credits
Manage your CRE risk
In response to this growing need, we have developed a comprehensive CRE Risk Management Review process. Our experts will:
- Review each of the seven areas of emphasis
- Identify weaknesses and inadequacies
- Recommend appropriate curative steps
- Help you prepare for a successful CRE Loan Portfolio examination
Beyond the potential to improve your exam performance, our CRE Portfolio review process will provide you with the insights and tools needed to more profitability and effectively manage this important component of your financial institution’s business.