At this point, many people have a pretty good idea that banks are facing significant challenges from CRE loans — even federal regulators. The Financial Stability Oversight Council recently released its annual report that both said, "Despite the regional bank stress in the Spring, the U.S. banking system remains resilient overall" and noted that commercial real estate loans, are a significant potential vulnerability.
The FSOC noted that CRE loans are "the largest loan category among almost one-half of U.S. banks" and that a quarter of banks "have CRE loan portfolios that are large relative to the capital they hold."
And so, the state of CRE loans is important. It could affect bank stability and ability to lend, and also undermine the value of CRE property.
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