Banks Took On More CRE Lending Risk In 2016
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Major US banks jacked up the risk they’re willing to take on for the fourth year in a row, lowering lending standards in an attempt to drum up more business.
That’s according to the Office of the Comptroller of the Currency, which found in its annual survey that banks weakened underwriting standards for commercial real estate loans, residential mortgages, direct consumer loans and conventional home equity over the course of 2016, Reuters reports. The same office also saw double-digit jumps in the percentage of banks that loosened underwriting standards since 2015, with many banks saying they plan to keep adding risk.
Weak underwriting was a major red flag just before the 2008 financial crisis, and experts say Wall Street is rekindling the dangerous practice in response to competition from other banks and non-financial firms. [Reuters]