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FDIC to Increase Commercial Real Estate Supervision in Exams

FDIC to Increase Commercial Real Estate Supervision in Exams

Posted: Aug 10 2022
The FDIC has released its Summer 2022 Supervisory Insights which notes its intention to increase supervision over commercial real estate portfolios. 

“Over the 2021 examination cycle, FDIC examiners observed a notable level of loan policy exceptions as well as opportunities for improvements in tracking and monitoring policy exceptions. Additionally, examiners noted some areas of underwriting weaknesses.”

“Some banks with significant CRE portfolios have not performed sufficient risk analysis, despite elevated risk profiles. Others have not addressed the board of directors’ expectations with respect to such testing and analysis in their policies. In addition, examiners observed that the design and complexity of some testing or analysis methods were inconsistent with the nature of the CRE portfolios and lending environments.”

Due to these observations and other uncertainties in the market including, but not limited to, inflation, interest rate risk and supply chain challenges, the FDIC will increase their focus on commercial real estate loan concentrations in the upcoming exam cycle.  

“As a continuance of the FDIC’s longstanding risk-focused and forward-looking supervision principle, FDIC examiners prioritize resources toward areas presenting the highest risk at an individual bank, which often includes significant CRE lending concentrations.”

To view Supervisory Insights, visit: https://www.fdic.gov/regulations/examinations/supervisory/insights/sisum22/si-summer-2022.pdf
 
For an overview of FDIC Examinations, visit: https://www.fdic.gov/resources/bankers/exam-processes-and-procedures/
 
 

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