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The policy that finally came out did little more than warn that "rising commercial real estate loan concentrations may expose institutions to unanticipated earnings and capital volatility in the advent of adverse changes in commercial real estate markets".
Early last year, the regulators proposed new rules on such loans, but the watered-down policy that finally came out did little more than to warn that "rising commercial real estate loan concentrations may expose institutions to unanticipated earnings and capital volatility in the advent of adverse changes in commercial real estate markets".
Steer clear of banks with big loan concentrations in overbuilt, overpriced regions.
With today's more stringent banking regulations, many performing loans (borrowers making their payments) are declined for refinancing because of commercial real estate loan "concentrations" that regulators deem more risky.
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"Neighborhoods where over 50percentt of the population is black or Latino you have payday loan store concentrations that are twice as large than neighborhoods where less than 25percentt of the population is black or Latino," Davis said.
Regulators are focusing on the way both companies reported their subprime mortgage portfolios and concentrations of loans extended to borrowers who offered little documentation, also known as Alt-A loans.
The agencies fear that a real estate market decline could cause the closing of numbers of financial institutions with high concentrations of loans.
"The shoes were crushed, brittle and in pieces when they arrived here on long-term loan from Majdanek, the concentration camp near Lublin in southeast Poland.
But heavy concentrations of loans to particular countries or industries that suffer widespread defaults can do so.
That includes tackling RBS's excessive concentrations of loans and long-standing fascination with absolute profits, not risk-adjusted returns.Reversing the second mistake, ABN, will take longer.
The agency is specifically looking at the way the companies reported their subprime mortgage portfolios and concentrations of loans extended to borrowers who offered little documentation.
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