Supervisory Insights - Fall 2019 - PDF
Letter from the Director
Articles
Commercial Real Estate Loan Concentration Risk Management
This article provides an update on the extent of commercial real estate (CRE) lending exposure in the banking industry as a whole. The article also provides CRE loan risk management and governance trends observed at FDIC-supervised insured depository institutions (IDIs) with concentrations in CRE. These institutions represent over three-quarters of all IDIs with concentrations in CRE and 61 percent of all assets of IDIs with concentrations in CRE. The article discusses broad supervisory findings and does not establish new requirements or new supervisory guidance. Rather, it provides insights into current industry risk management practices and governance, based on examiners’ views.
Leveraged Lending: Evolution, Growth and Heightened Risk
Leveraged lending provides credit to commercial businesses with higher levels of debt and also helps companies obtain funding for transactions involving leveraged buyouts (LBOs), mergers and acquisitions (M&A), business recapitalizations, and business expansions. Many commercial businesses successfully utilize and repay these loans; however, high debt levels coupled with lower levels of liquidity may reduce businesses’ flexibility to respond to changes in economic conditions. The recent period of economic expansion combined with low interest rates provided companies with the opportunity to increase their debt levels over the past decade. As a result, more businesses sought, and received, leveraged loans.
Regular Features
Regulatory and Supervisory Roundup
This feature provides an overview of recently released regulations and other items of interest.
Supervisory Insights
Supervisory Insights is published by the Division of Supervision and Consumer Protection of the Federal Deposit Insurance Corporation to promote sound principles and best practices for bank supervision.
Jelena McWilliams
Chairman, FDIC
Doreen R. Eberley
Director, Division of Risk Management Supervision
Journal Executive Board
Division of Risk Management
Supervision
Rae-Ann Miller, Associate Director
and Executive Editor
James C. Watkins, Senior Deputy Director
Martin D. Henning, Deputy Director
John F. Vogel, Deputy Director
Division of Depositor and Consumer
Protection
Jonathan N. Miller, Deputy Director
Regional Directors
John P. Conneely. Chicago Region
Michael J. Dean. Atlanta Region
Kristie K. Elmquist, Dallas Region
Frank R. Hughes, New York Region
James D. LaPierre, Kansas City Region
Kathy L. Moe, San Francisco Region
Journal Staff
Kim E. Lowry
Managing Editor
Christopher Pugliano
Financial Writer
Barbara Stahl
Financial Writer
Supervisory Insights is available online by visiting the FDIC’s website at www.fdic.gov. To provide comments or suggestions for future articles, to request permission to reprint individual articles, or to request print copies, send an e-mail to SupervisoryJournal@fdic.gov.
The views expressed in Supervisory Insights are those of the authors and do not necessarily reflect official positions of the Federal Deposit Insurance Corporation. In particular, articles should not be construed as definitive regulatory or supervisory guidance. Some of the information used in the preparation of this publication was obtained from publicly available sources that are considered reliable. However, the use of this information does not constitute an endorsement of its accuracy by the Federal Deposit Insurance Corporation.