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Excessive, Carefree Commercial Lending Puts US Banks At Risk

Bank loans

US banks are being warned against picking up excessive commercial real estate loans without taking necessary precautions.

The Office of the Comptroller of the Currency—which oversees US banks with the Federal Reserve—emphasizes the need for sound risk management when it comes to commercial lending.

A recent OCC report notes that credit risks have increased due to lax underwriting standards and carefree lending rules. In 2015, lending for large banks increased to 5.9%, up from 3.6% the year prior, and smaller banks in particular are bulking up on commercial and residential portfolios.

Comptroller Thomas Curry stressed to Bloomberg that banks with substantial real estate portfolios need to focus on risk management, following necessary protocol to manage their exposure. [Bloomberg]