Financial Institution Letter: Advisory: Managing Commercial Real Estate Concentrations

The FDIC is issuing an advisory to reemphasize the importance of strong capital, appropriate credit loss allowance levels, and robust credit risk-management practices for institutions with commercial real estate (CRE) concentrations.  It also conveys several key risk management practices for institutions to consider in managing CRE loan concentrations in the current challenging economic environment.  Additionally, the advisory reemphasizes the importance of effectively managing liquidity and funding risks, which can compound lending risks, particularly for CRE-concentrated institutions.  This advisory replaces the 2008 advisory: Managing Commercial Real Estate Concentrations in a Challenging Environment (issued March 17, 2008). Read the FIL.