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Financial Institution Letter

Advisory: Managing Commercial Real Estate Concentrations in a Challenging Economic Environment


The FDIC is issuing this 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).

Statement of Applicability: The contents of, and material referenced in, this FIL apply to all FDIC-supervised financial institutions.


  • The FDIC is issuing this FIL to reemphasize the importance of strong capital and credit loss allowance levels, as well as robust credit risk management practices, for institutions with concentrated CRE exposures.
  • Institutions with significant CRE concentrations are advised to consider the risk management principles discussed in the joint Guidance on Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices (issued December 6, 2006), and the Interagency Policy Statement on Allowances for Credit Losses (Revised April 27, 2023).
  • The advisory also identifies key risk-management actions for financial institutions with significant CRE concentrations to manage through changes in market conditions:
    • Maintain strong capital levels,
    • Ensure that credit loss allowances are appropriate,
    • Manage construction and development (C&D) and CRE loan portfolios closely,
    • Maintain updated financial and analytical information,
    • Bolster the loan workout infrastructure, and
    • Maintain adequate liquidity and diverse funding sources.
  • Institutions are encouraged to continue making CRE credit available in their communities using prudent lending standards that rely on strong underwriting and loan administration practices.
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Last Updated: December 18, 2023