FDIC Wary on CRE

The Federal Deposit Insurance Corp. is becoming more wary of falling rental rates and increasing vacancies in office and industrial properties, which could lead to loan losses down the road."Although the outlook for commercial real state markets is rather pessimistic, banks have not yet seen deterioration in CRE loan portfolios," FDIC says in a semi-annual review of emerging risks. However, there are "sporadic reports of office properties selling below replacement cost," FDIC point outs, which could indicate coming problems. Meanwhile, FDIC is warning that the slowdown in 13 previous high-growth cities, such as Atlanta, San Francisco/Oakland, and Seattle, has left many community banks with large concentrations of high-risk business and CRE loans. These conditions "warrant extra attention to risk management practices on the part of lenders," FDIC says. FDIC also is keeping its eye on subprime lenders, with special attention on subprime credit card lenders. "Institutions identified as subprime lenders continue to be over-represented among troubled institutions," FDIC says in the semi-annual report.