Office of Thrift Supervision Director John Reich broke ranks with his fellow regulators Sept. 14 over proposed guidance on commercial real estate lending and warned at a congressional hearing that banks and thrifts might view the concentration thresholds as caps and limit their CRE lending.The OTS director testified that he supports issuing guidance to raise awareness that high concentrations of CRE loans need to be effectively managed, but not with the threshold numbers. "I do have a concern that they will view them as limits and caps," Mr. Reich said. Multifamily and commercial property loans (plus land, development, and construction loans) that exceed 300% of equity capital would be considered a high concentration under the proposed guidance. Residential and commercial ADC loans that exceed 100% of equity capital would also be considered a high concentration. The OTS director told the panel that it is "inappropriate" to lump multifamily loans with shopping mall and office building loans in determining high concentrations of CRE loans. FDIC Chairman Sheila Bair testified that the guidance will emphasize that the "stated thresholds are not limits" and will recognize that different property types have different risk characteristics.

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