Federal banking regulators have issued final guidance on commercial real estate lending that raises supervisory concerns about banks with CRE concentrations above 300% of capital, but the Office of Thrift Supervision has taken a different approach and dropped the numerical thresholds.Bankers and key members of Congress have complained that thresholds will effectively force community banks to restrict their CRE lending. However, the banking regulators contend that the thresholds "do not constitute limits on CRE lending," and examiners will be instructed to consider other factors, such as portfolio diversification and risk characteristics, in evaluating an institution's CRE lending program. There is a 300% concentration threshold for all CRE and construction-and-development loans and a 100% threshold for C&D loans, including single-family construction loans. OTS Director John Reich stuck to his guns and dropped the concentration thresholds in issuing final guidance for federally chartered thrifts. Mr. Reich told Congress earlier this year that he was concerned that thresholds will be viewed as caps by institutions and examiners. Reps. Barney Frank, D-Mass., and Spencer Bachus, R-Ala., said they are "disappointed" that the banking regulators included thresholds in the final guidance.

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